Why aren't more Bitcoin miners based in Canada?

Original title: Why aren’t more Bitcoin miners settling in Canada? Source: Ear Finance

As more Bitcoin miners migrate from China, they are hesitant to settle in Canada, despite abundant energy and a cool climate. But why?

Canada appears to have many advantages for Bitcoin mining – large amounts of idle renewable resources (mostly hydroelectricity), a cool climate (which makes it easier on equipment), and a lower fiat currency value (more competitive than the U.S. dollar).

But even with China’s recent 20% reduction in hash rate due to regulatory policies, and with the U.S. hash rate climbing to 17%, the Cambridge Centre for Alternative Finance estimates that Canada’s share of the world’s Bitcoin network is currently just 3%.

Malaysia, Kazakhstan, Iran, and Russia all have higher hash rates than Canada.

So, what’s keeping Bitcoin miners away from Canada?

Canada's energy costs put Bitcoin miners off

Compass Mining, a full-service mining hosting and equipment provider, recently released an in-depth mining report that included a study of the Canadian mining industry and concluded that energy should be cheap there — but the problem lies in the regulatory environment. In addition, the report noted that the Canadian government is working on a carbon tax, which could increase energy costs.

Colin Sullivan, CEO of British Columbia-based MintGreen, confirmed the above, explaining that energy prices in the province are relatively high because local energy supplier BC Hydro is a crown corporation and does not have the same commercial pressures as private suppliers.

“I wouldn’t describe energy prices as globally competitive,” Sullivan told Bitcoin Magazine. “In my conversations with Chinese miners, they are looking at energy costs around $50 per megawatt-hour.”

For his business in particular, this concern isn’t a deal-breaker for operating in Canada, although many other bitcoin mining operations might not see it that way.

“MintGreen is less concerned about electricity prices because we’ve created a heat market with miners,” Sullivan added. “By selling heat through our digital boilers, we can be more competitive regardless of energy prices. This green grid electricity makes British Columbia a great fit for us.”

The World Bank publishes rankings for the ease of doing business, which include a measure of access to electricity. Its data gives Canada a low score on access to electricity, ranking it 124th out of 190 countries in the ease of getting electricity. (The U.S. ranks 64th.)

Citadel256, a Canadian startup whose founding partners are all Canadian entrepreneurs, is helping miners from China relocate to Texas and the U.S. Midwest because energy supply issues make it difficult for them to return to their home country.

“We would like to recommend Canada, but the issue here is not the cost of energy itself, but the logistics of accessing the energy market,” Citadel256 co-founder and mining consultant Magdalena Gronowska told Bitcoin Magazine. “Energy is abundant in Canada, but access is not cheap. The costs of energy infrastructure — generation, transmission and distribution — are spread across and recovered from the rate base.”

“Canada has a vast land mass and infrastructure investment is recouped on a smaller population base than the United States, so it’s more expensive,” she added.

Canada’s Regulatory Environment Pushes Bitcoin Miners Elsewhere

Compass Mining’s report identifies Canada’s regulatory environment as a major issue for mining companies, noting that “the country’s high level of bureaucracy has hampered the growth and scalability of Bitcoin mining” and that “a lack of clarity on how crypto assets are distributed” should be addressed. This is further complicated by the fact that each province in Canada has its own securities regulator.

The report cites the case of Blockstream Mining, which has mining farms in Quebec and the U.S. state of Georgia. Looking ahead, Blockstream chose to expand in Georgia because it found the regulatory environment in Quebec difficult to navigate.

Gronowska agrees with Compass Mining that Canada’s regulatory environment is a challenge.

“Regulatory burdens and red tape can also increase the cost and timeline uncertainty of facility construction, which can add risk to any mining project,” she noted. “Canada has strict environmental and safety regulations. For example, carbon neutrality is increasingly becoming a cost center and factoring into long-term operational decisions. Electrical equipment that meets our standards may result in longer lead times.”

Compass concluded that it was the country’s unclear regulatory environment that caused mining companies to look elsewhere.

“The myriad of regulatory agencies increases the risk that miners could be subject to changes that adversely affect their operations,” the report said. “Provincial, federal, and municipal governments could also introduce changes that adversely affect mining operations.”

Gronowska agreed that businesses in Canada tend to be biased, and that fragmented regulation and multiple regulators present additional challenges for bitcoin miners.

“Miners seek the path of least resistance and favor more business-friendly jurisdictions outside of Canada,” she said.

Canada does have some advantages for Bitcoin miners

Still, some Bitcoin mining operations, like MintGreen, have been able to find a niche that makes Canada their perfect home. Alberta is the most business-friendly jurisdiction in the country, and companies like Upstream Data have been able to thrive off the grid by utilizing natural gas flaring from oil production.

Another positive is that bitcoin mining companies looking to list on Canadian stock exchanges may be more successful than in the United States.

“Stock exchanges with less stringent listing requirements, such as the Toronto Venture Exchange (TSXV), have led to a variety of cryptocurrency companies trading on the Canadian public markets,” Compass Mining reported. “Compared to their U.S. counterparts, Canadian companies generally have a higher risk profile.”