The global Bitcoin mining industry staged a remarkable recovery in 2023, emerging from the depths of the 2022 "crypto winter." Key economic indicators showed significant improvement: the price of Bitcoin surged by 154%, publicly traded mining company stocks increased by 246%, and network transaction fees—largely dormant since mid-2021—once again became a substantial component of miner revenue. Additionally, costs associated with energy, hosting, and hardware saw notable decreases.
However, the landscape for Bitcoin mining in Canada was more turbulent. Government pressure that began in 2022 continued, with policies that explicitly targeted and discriminated against the industry. This placed the sector in a defensive posture for most of the year, with the notable exception of Alberta. Consequently, major industry players began looking overseas for more favorable opportunities. Canada's share of the global Bitcoin network hashrate is now expected to drop to 4-5% by the end of 2023, a significant decline from 7-8% at the end of 2022 and a peak of nearly 13% in 2021.
An Economically Improved 2023 vs. A Challenging 2024
Following a difficult 2022, the global Bitcoin mining industry found solid footing in 2023. The most significant driver was the price of Bitcoin itself, which rose 154% over the year, nearly erasing the previous year's losses.
A more unexpected source of revenue emerged from the revival of Bitcoin network transaction fees. The development of Ordinals and Inscriptions led to a substantial increase in the fees miners earned from processing transactions. In 2023, transaction fees accounted for 7.6% of the total block reward, a dramatic increase from a mere 1.5% in 2022.
Hashprice—a composite measure of a miner's revenue per unit of computing power—rose from $59/PH/day to $101/PH/day, an increase of 70%. This surge was primarily driven by significant volatility in transaction fees during May and December. The average hashprice for the year settled at $75/PH/day.
Despite the relatively good fortune of 2023, a significant challenge looms on the horizon for 2024: the Bitcoin halving. This quadrennial event will cut the block subsidy reward in half. The secondary effects on Bitcoin's price, network difficulty, and transaction fees are subjects of debate. While some argue the halving will drive the price up, others point to a potential decrease in network difficulty as less profitable miners shut down their operations. Sustained higher transaction fees, as seen after previous halvings, could also help offset the reduced revenue from the lower block subsidy.
The one certain outcome is a significant, immediate negative shock to miner revenues. The halving is currently projected to occur around April 21, 2024.
Regulatory Hurdles Continue to Challenge the Canadian Mining Industry
Policy decisions made in 2022 continued to negatively impact Canadian mining operations throughout 2023. In the wake of the trucker protests and the crypto market downturn, policymakers at various levels of government erroneously singled out mining rigs, subjecting them to specific taxes, electricity rates, and interconnection bans not applied to other computing industries.
This adversarial environment forced the Canadian mining sector into a defensive stance, focusing its efforts on establishing serious, long-term, and coordinated advocacy organizations to represent its interests.
Unfortunately, these poor policy decisions have resulted in lost jobs, investment, and tax revenue for the Canadian economy. At the federal level, the government created significant uncertainty with a proposed "clarifying" amendment in February 2022. Introduced without prior industry consultation, it declared that digital asset mining did not constitute "commercial activity" in Canada. This would have prevented mining companies from claiming input sales tax credits available to all other export-oriented businesses, effectively creating a 5-15% implicit tax on Bitcoin mining in Canada.
Thanks to advocacy from the newly formed Digital Asset Commerce Council and member companies, the final legislation was amended. Miners may now be eligible for the tax credits if the Canada Revenue Agency (CRA) determines on a case-by-case basis that they are selling hashrate to overseas mining pools in a manner similar to how traditional data centers sell computing services. The industry is still awaiting feedback and these case-by-case determinations from the CRA, with updates expected in early 2024.
Interconnection bans enacted in 2022 remained in effect in British Columbia, Manitoba, Quebec, New Brunswick, and Newfoundland and Labrador. These regions possess some of the world's cleanest, cheapest, and most abundant electricity, which naturally attracts global mining investment. Instead of capitalizing on this opportunity by streamlining application processes and enhancing grid flexibility, these provinces chose to close the door, citing concerns over peak electricity demand while overlooking the industry's inherent flexibility in energy usage.
In British Columbia, forestry company Conifex Timber, which sought to invest in mining, took legal action against the province's ban. A publicly released whitepaper from Conifex argued that the provincial cabinet's actions were unlawful, interfered with the regulatory system, and contravened the government's own economic, carbon reduction, and reconciliation goals.
Amid this challenging landscape, Alberta emerged as a clear exception. Provincial elected officials recognized the benefits of the digital asset mining industry, particularly in creating high-tech jobs in rural and remote areas, as well as its potential for environmental and energy system sustainability. They actively courted investment and encouraged economic development. Premier Danielle Smith and Minister Dale Nally attended a Bitcoin mining trade event, and Minister Nate Glubish spoke about the benefits of mining at the "Bitcoin Rodeo" conference.
In Ontario, the Ministry of Energy appears to have abandoned a 2022 plan to exclude cryptocurrency miners from the Industrial Conservation Initiative (ICI), a demand-response program that allows participants to reduce their global adjustment costs by lowering energy usage during peak hours.
Canadian Miners Demonstrate Resilience and Expand into New Markets
Despite policy headwinds, Canadian mining companies continued to innovate and expand into new markets in 2023.
Most notably, Hut 8 completed one of the industry's largest mergers, an all-stock merger with US Bitcoin Corp. The new entity, New Hut, is headquartered in the United States and ranks as one of North America's largest operators of self-mining and high-performance computing infrastructure, with a total power capacity of roughly 825 megawatts (MW).
Other clean-energy-focused miners like Hive and Bitfarms expanded their operations outside of Canada. Bitfarms secured access to a 100 MW mining facility in Argentina and a contract for up to 150 MW of hydroelectric power in Paraguay. Hive completed the acquisition of a hydroelectric data center in Sweden.
On the hardware front, several notable collaborations emerged. Hive deployed its BuzzMiners, powered by Intel's Blockscale ASIC, after months of development. Later in the year, Toronto-based ePIC Blockchain announced a partnership with Chain Reaction to produce its next-generation Bitcoin mining systems.
Mining companies also diversified their revenue streams. DMG Blockchain became a leader in the emerging market for Ordinals and Inscriptions. Hut 8 expanded beyond Bitcoin mining by securing a contract to provide secure co-location services for Interior Health in British Columbia. Iris Energy began a strategic pivot into the artificial intelligence market, leveraging its high-performance computing data centers.
Innovation in heat capture continued with BlockLAB, which piloted a system using excess heat from Bitcoin mining to provide a low-cost heating solution for greenhouse operations. Container manufacturers like Upstream Data, CryptoTherm, Bit-Ram, and Intelliflex maintained their leadership in innovative air- and liquid-cooling systems across North America.
For those looking to understand the financial mechanisms and tools that underpin this global industry, a deeper analysis is often required. You can explore advanced market analysis tools to gain further insight.
Looking Ahead: Challenges and Opportunities for 2024 and Beyond
While rising Bitcoin prices and transaction fees provided much-needed relief in 2023, the upcoming halving will force the industry to focus intensely on profitability. The certain outcome of the halving is a major negative shock to revenue. To survive, companies must aggressively cut costs, improve operational efficiency, and protect their margins.
On the policy front, significant improvement outside of Alberta seems unlikely in the near term. At the federal level, the governing Liberal party often frames digital assets as a political weapon against its opponents rather than an economic opportunity. While rising Bitcoin prices could change the political calculus, bureaucratic inertia makes it unlikely that provincial interconnection bans will be overturned in 2024. Educating provincial governments and grid operators on the benefits of the industry will require continued, significant effort.
Nevertheless, establishing serious, long-term advocacy remains a worthwhile investment for the industry. Canada is naturally positioned to be a leader in cryptocurrency mining and other power-intensive computing industries. It boasts an abundance of low-cost, sustainable energy; a highly skilled workforce; a cold climate; underutilized industrial infrastructure (particularly in rural areas); and a relatively stable and secure political environment.
Public opinion polls suggest a potential for political change. To capitalize on this, the mining industry must continue to demonstrate its value. It creates high-tech jobs, brings investment to rural and remote communities with limited opportunities, and supports environmental sustainability by leveraging wasted energy (like stranded gas), stabilizing grids through demand response, and enabling new renewable energy projects. Perhaps most importantly, it exports Canada's trapped energy to global markets without the need for physical transmission lines or pipeline infrastructure, as hashrate is sold over the internet.
The success of cryptocurrency mining in Canada in 2024 and beyond will depend on the industry's ability to generate profit through cost reduction and efficiency gains, while simultaneously continuing to educate the public and policymakers on its extensive benefits.
Frequently Asked Questions
What was the biggest change for Bitcoin miners in Canada in 2023?
The biggest change was the economic recovery from the 2022 bear market, characterized by a 154% increase in Bitcoin's price and a resurgence in transaction fee revenue. However, this was offset by continued regulatory challenges in most Canadian provinces.
How does the Bitcoin halving in 2024 affect miners?
The halving will immediately reduce the block subsidy reward by 50%, constituting a major negative shock to miner revenue. Miners must compensate for this by improving efficiency, cutting costs, and hoping for a compensating rise in Bitcoin's price or transaction fees.
Why is Alberta more friendly to Bitcoin mining than other Canadian provinces?
Alberta's government actively recognizes the industry's economic benefits, including job creation in rural areas and its potential to support energy sustainability. Provincial officials have actively engaged with the industry and encouraged investment, unlike other provinces that have enacted bans.
What are the main advantages for mining in Canada?
Canada offers key advantages including abundant, low-cost, and sustainable hydroelectric power, a cold climate that reduces cooling costs, a stable political environment, and significant technical expertise.
How are Canadian mining companies adapting to regulatory challenges?
Companies are adapting by expanding operations into more friendly jurisdictions like the United States, Paraguay, and Argentina. They are also diversifying their business models into areas like AI computing, high-performance computing services, and new technological innovations like heat capture.
What is the long-term outlook for Bitcoin mining in Canada?
The long-term outlook depends heavily on regulatory evolution. The industry possesses the natural advantages for success, but its growth is contingent on policymakers recognizing its economic and environmental benefits and creating a stable, non-discriminatory regulatory framework.