China recently established new regulations to ban all crypto transactions and cryptocurrency mining, citing concerns over the stability of the country's financial and monetary systems, as well as the energy requirements for "cryptomining," which are at odds with China's goals for reducing carbon emissions.
Over the years, many cryptominers set up their operations in China, where cheap (but dirty) electricity and cryptomining computers were readily available. For a time, cryptomining was only loosely regulated in China. However, China's recent crackdown has initiated a mass exodus of cryptominers from the country.
The developments in China will create opportunities in other jurisdictions, as cryptominers look for cheap, reliable and, increasingly, clean energy sources to power their energy-intensive operations.
Opportunities in Western Canada
Cryptomining is a complex and energy-intensive process that introduces new cryptocurrency into the market. It involves no extraction of natural resources, but requires powerful computer processors that need significant amounts to electricity to operate.
Alberta and Saskatchewan are promising jurisdictions for cryptominers. Both provinces have fast-growing renewable energy industries that could supply energy to the cryptomining industry. Opportunities also loom for Western Canada's oil and gas sector. To date, oil and gas companies customarily flare or burn excess natural gas from a well, as they may not have the infrastructure to transport natural gas to market. But they can produce electricity from flare gas operations that could be used to supply nearby cryptomining operations.
Although this article focuses on Alberta and Saskatchewan, Manitoba and British Columbia also have an abundance of comparatively cheap and, most importantly, clean power generated from large hydroelectric facilities. It's possible that regulators in one or both of those provinces may permit or even incentivize cryptomining projects in the future.
In Canada, cryptomining is subject to some regulation mostly related to taxation and securities law, but there currently is no national or provincial law broadly regulating cryptomining. However, such regulation may be forthcoming in the future.
Given that the most significant expense in most cryptomining operations is electricity, the regulation of power generation facilities is important in any cryptomining project.
For example, all four western provinces have regulations governing power plants - even small ones - that are being set up to supply electricity for a cryptomining operation. Power plants looking to supply electricity to cryptomining operations need to ensure they are not contravening any of the various rules and regulations, and they must obtain all the required permits if they plan to supply onsite power generation to a cryptomining operation.
In Alberta, there are several pieces of legislation and governing bodies relevant to cryptomining operations and the power plants that supply electricity to them.
The Alberta Utilities Commission (the "AUC") is the main body that regulates all power production, sale, transmission and distribution across the province. Generally, to operate a power plant in Alberta, project proponents need to obtain approval from the AUC. There are, however, certain exemptions, and the AUC has recently enforced restrictions on power plants that supplied electricity to cryptominers without meeting the conditions for an exemption.
Power plant proponents may also be required to receive approval from Alberta Environment before developing a power plant or a cryptomining operation. For instance, Alberta Environment will regulate the emissions or noise pollution resulting from a power plant or cryptomining operation.
Finally, the Alberta Energy Regulator is another regulatory body that could impose further rules and regulations on cryptomining projects that receive power from flare gas operations.
The Saskatchewan Power Corporation, which operates as SaskPower, is the principal electric utility in Saskatchewan. As a crown corporation, SaskPower governs the production, sale, transmission and distribution of all power in the province.
Similar to in Alberta, the size of an operation in Saskatchewan dictates what approvals are required. Generally speaking, all power generation facilities require some form of approval from SaskPower.
Recently, SaskPower spokesperson Scott McGregor explained that a large-scale cryptominer would need approval from SaskPower before producing power, in the same way that any large independent power producer would need approval before producing power to supply to a steel mill or any large industrial customer. That said, McGregor also stated that a smaller operation, such as a cryptomining operation out of someone's garage, would likely result in higher power bills, but may not require any other approvals from SaskPower because no electricity is being generated.
At the moment, SaskPower does not explicitly prohibit cryptominers from purchasing electricity from SaskPower to use in their data mining operation. However, SaskPower would have the ability to impose additional restrictions on the use of such power, and the amount consumed.
The size or structure of the power plant and cryptomining operation may also trigger approval requirements with Saskatchewan's Ministry of Environment, similar to in Alberta.
Finally, the location of a cryptomining operation in Saskatchewan will have an effect on the rules that would apply. For example, locating a cryptocurrency mining facility on First Nations reserve land could mean that federal or First Nation regulations apply, not the related provincial regulations. Locating a cryptomining operation in the franchise areas of the municipal utilities in the City of Saskatoon or City of Swift Current may require compliance with a different set of regulations - which could potentially be more or less onerous.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.