What are Caisse and Hydro doing in cryptocurrency?

Caisse de depot et Placement du Québec didn’t fail with an investment of around $200 million in the US-based cryptocurrency bank Celsius.

Posted at 9:00 am.

She is seated royally.

Last October, Caisse became a shareholder in Celsius, a bank that offered crypto loans and interest rates up to 17% on crypto deposits. However, bitcoin lost 65% of its value and Celsius ran out of money to cover investor withdrawals. In July, the company protected itself from creditors. She owes them US$1.9 billion but only has US$167 million.

In a word, we will no longer see our money.

Caisse has underestimated its risk in this area with little or no regulation, a speculative bubble that aims to bypass the traditional monetary system. She did not reflect on the ethical aspect. In addition, she made a bet on the wrong horse, which has already appeared in the field of view of the authorities of the financial markets of some US states.

As spectacular as it may be, this mistake must be seen in perspective, placed in context.

Caisse made this investment from its $1.5 billion venture capital portfolio. VCs are like power hitters in baseball: they always hit on goal and inevitably lose more often. What matters is the average.

Caisse’s venture capital portfolio has been generating returns of 35% to 40% per annum for the past five years. Total return on all Caisse assets over this period: 8.9% per annum. Therefore, venture capital is very beneficial for Caisse.

In addition, Caisse places only 0.36% of its assets in venture capital (1.5 billion out of 419.8 billion). This allows us to support our startups without putting Quebecers at risk of retirement.

Quebecers will have to rethink their views on Celsius (lesson number one: stay away from crypto), but that shouldn’t stop them from continuing to invest in venture capital.

Caisse invests in venture capital around twenty tech companies (none in crypto except Celsius), of which just over half are based in Quebec. For a disaster like Celsius, there are some great Quebec techno hits like Lightspeed, Hopper and Nuvei. Don’t throw the baby out with the bath water.

Moreover, another Quebec institution needs to rethink its relationship with the crypto industry: Hydro-Quebec.

If the trend continues, then soon the state-owned company will sell 1% of its electricity at a loss to cryptocurrency miners.

Creating a cryptocurrency is very energy intensive. Blockchain information must be extracted using complex mathematical operations. This is the opposite of a financial system based on reliable and regulated financial institutions.

The state-owned company has a feed-in tariff three times cheaper (6 cents/kWh instead of an industrial tariff of 18 cents/kWh) for hundreds of Quebec cryptocurrency miners. They consume 111 megawatts, or 0.3% of the total grid capacity.

But now, the Régie de l’énergie has just forced Hydro-Québec to offer another 270 megawatts of cryptocurrency at a reduced rate of 6 cents/kWh.

It is beneficial for bitcoin miners to have access to cheap electricity.

For Quebec, we are subsidizing an industry that has no additional economic benefits, very little social utility, damages the monetary sovereignty of countries, is not regulated, is used by criminal organizations to launder money, and is very polluting.

Hydro-Québec must return to the Régie de l’énergie to find a way to reverse the decision made last fall. Otherwise, he will sell up to 1% of his electricity at a loss to cryptocurrency miners (he sells 6 cents/kWh, and any additional power will cost him 10 cents/kWh in 2025).

Cryptocurrency is hard to ban.

But we are not obligated to provide electricity at a discount. And don’t finance it with our woolen stocking.

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