MONTREAL (Reuters) - At least two Canadian forestry companies are reviewing offers by cryptocurrency miners who want to lease excess mill space in Quebec, a province where electricity prices are among the lowest in North America.
“They want space and cheap power,” Chad Wasilenkoff, chief executive of British Columbia-based Fortress Global, said. U.S. miners are interested in space at the company’s Quebec dissolving pulp mill, he added.
A surge in demand for space to build data centers that “mine” digital currencies offers potential new revenue streams for Canadian forestry firms looking to find uses for space in mills no longer used for production due to declining demand for certain traditional industry products.
Montreal-based Resolute may hold a call for tenders as a way to attract well-capitalized cryptominers eager for space at the company’s mill in Gatineau, Quebec, near the Canadian capital Ottawa, and other sites.
“We are getting inquiries every week,” said Resolute spokesman Karl Blackburn. “We have space that could be used but there are still a lot of questions.”
Miners are looking at the pulp and paper industry because their facilities are already equipped to meet the needs of the energy-sapping cryptomining industry, said Laurent Feral-Pierssens, blockchain advisory lead at KPMG Canada.
Cryptomining 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 cryptocurrency and the transaction is added to the blockchain.
The threat of a crackdown in countries like China has driven miners to Canada, with the country’s largest electric utility Hydro Quebec seeing its cryptocurrency sales pipeline more than triple in a month to over 100 projects, spokesman Marc-Antoine Pouliot said.
Israel’s Blockchain Mining Ltd NRH.TA is set this month to buy control of Canada’s Backbone Hosting Solution, known as Bitfarms, and is preparing to list its stock on Nasdaq and the Toronto Stock Exchange after Israel’s market regulator said it might ban companies involved in cryptocurrencies from the Tel Aviv exchange. Bitfarms already mines at four sites in Quebec and the company expects to open three more facilities.
Feral-Pierssens said recent declines in value of bitcoins are unlikely to deter miners who understand the “volatile nature of the cryptoasset” they are producing.
“Their model is straightforward and projects will continue to emerge as long as a return can be made,” said Feral-Pierssens, who is also a partner in a venture capital firm aimed at the blockchain industry.
Quebec Economy Minister Dominique Anglade said by email that while cryptocurrency mining represents interesting growth potential for Quebec, the government has the “responsibility to remain prudent” toward the fledgling sector.
Canada is also drafting regulations “to mitigate the money laundering and terrorist financing risk of virtual currencies,” a government spokeswoman said, although it is not clear when they will be made public.
Reporting By Allison Lampert in Montreal; Additional reporting by Leah Schnurr in Ottawa; Editing by Denny Thomas and Chris Reese