Chinese bitcoin miners eye sites in energy-rich Canada

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* Cryptocurrency miners attracted by Quebec’s low energy
costs

* Worries that Beijing may crack down on cryptocurrency
mining

* Hydro Quebec says 30 cryptocurrency miners are potential
clients

* Manitoba in central Canada also attractive for miners

By Allison Lampert, Alexandra Harney and Brenda Goh

MONTREAL/SHANGHAI, Jan 12 (Reuters) – China’s Bitmain
Technologies is eyeing bitcoin mining sites in Quebec, a company
spokesman told Reuters, as expectations of a potential Chinese
crackdown on cryptocurrency mining make the energy-rich Canadian
province an attractive alternative.

China has grown into one of the world’s biggest sources of
cryptocurrency mining but there are signs Beijing is increasing
scrutiny of the sector’s players and may ask local authorities
to regulate their power use. Bitmain Technologies, operator of
some of the largest mining farms in the country, is among
several companies looking to expand overseas.

Bitmain spokesman Nishant Sharma said in an e-mail on Friday
that the company was looking at sites in Quebec and is in talks
with regional power authorities in the province. It is also
planning to expand in Switzerland.

Bitcoin mining consumes large quantities of energy because
it uses computers to solve complex math puzzles to validate
transactions in the cryptocurrency, which are written to the
blockchain, or digital ledger. The first miner to solve the
problem is rewarded in bitcoin and the transaction is added to
the blockchain.

While Beijing has not issued any official edict on the
bitcoin mines, two Chinese miners told Reuters that local
authorities had grown more unwilling to allow expansion and had
started to shut down some mines in late 2017, as China clamped
down on cryptocurrencies.

Last September, Chinese authorities banned so-called initial
coin offerings and ordered Beijing-based cryptocurrency
exchanges to halt trading.

“We, and from what I understand many of our peers, are
already making plans to go overseas,” said Li Wei, chief
executive of ZQMiner, a Wuhan-based company that sells bitcoin
mining equipment and has mines in three Chinese provinces.

Globally, regulators are increasingly voicing concerns about
cryptocurrencies, which are not backed by any central bank,
because of their volatility and worries about risks to
investors. China, which has strict capital controls, is also
worried that cryptocurrencies could facilitate illegal fund
flows and breed financial risks.

In Canada, Hydro Quebec described a potential sales pipeline
of around 30 large cryptocurrency miners after a campaign by the
public utility to attract data centres to the province triggered
a flurry of interest from bitcoin miners in 2017.

“Of the world’s top five largest blockchain players, we have
at least three or four,” David Vincent, director of business
development at Hydro Quebec distribution, said in an interview
on Wednesday.

 

MANITOBA ALSO ATTRACTIVE

Stephane Paquet, a vice president of Montreal International,
which promotes foreign investment in the province’s largest
city, has called Quebec a place for “green bitcoin.”

According to Hydro Quebec, the province has an energy
surplus equivalent to 100 Terawatt hours over 10 years. One
terawatt hour powers 60,000 homes in Quebec during a year.

Neither Hydro Quebec nor Montreal International would
divulge names of interested miners. Vincent said companies are
eyeing operations from about 20 megawatts, the size of a data
centre, to sites as large as 300 megawatts, about the size of a
small aluminum smelter.

He expects some of the large companies to begin operations
in Quebec this year and in early 2019. Bitmain’s spokesman said
that Bitmain has been mining in Canada since 2016, but did not
say where.

The challenge for miners is finding existing facilities in
Quebec that already have buildings and other infrastructure in
place to use the large energy supply required for cryptocurrency
mining. A new facility would take about a year to be
operational.

“We have the energy available,” said Eric Filion, customer
vice-president for Hydro Quebec’s distribution division. “It’s a
question of finding land and buildings quickly.”

Hydro Quebec, which offers some of the lowest electricity
rates in North America, charges an industrial rate of $0.0248
per kilowatt hour (Kwh) (2.48 U.S. cents) for data centres and
$0.0394/kwh (3.94 U.S. cents) for cryptocurrency customers.
Customers would have to assume other start-up costs, Filion
said.

Textiles and pulp and paper factories are particularly
attractive to cryptocurrency mining companies.

Alain Bourdages, a company vice president at Montreal-based
Resolute Forest Products Inc, said by phone that the
company has been contacted by cryptocurrency companies about
possibly sharing their existing production sites, or ones that
are no longer in use.

“We are looking at this prudently,” he said. “It’s an
interesting opportunity that could generate value.”

In central Canada’s Manitoba province, provincial
government-owned utility Manitoba Hydro has fielded more than
100 inquiries from cryptocurrency miners in the past three
months about specific sites, a company spokesman said.

The interest includes North American brokers who represent
Chinese investors, attracted by Manitoba’s cheap power and
potential reduced cooling requirements, spokesman Bruce Owen
said. It is working with two large-scale cryptocurrency
operations that want to set up in Manitoba, he said.

Manitoba’s power rates may soon rise, however. Manitoba
Hydro is asking the province’s utilities board to approve a rate
increase of 7.9 percent across the board, effective April 1,
2018. That is far larger than utility rate changes proposed last
year in other provinces, including 0.7 percent in Quebec,
according to Manitoba Hydro data.
(Reporting by Allison Lampert in Montreal, Alexandra Harney and
Brenda Goh in Shanghai; Additional reporting by Rod Nickel in
Calgary; Editing by Grant McCool and Raju Gopalakrishnan)