The Caisse de depot et placement du Québec did not fail by investing around 200 million in the American cryptocurrency bank Celsius.
Posted yesterday at 9:00 a.m.
She is royally planted.
Last October, the Caisse became a shareholder of Celsius, a bank that offered cryptocurrency loans and interest of up to 17% on cryptocurrency 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 its creditors. She owes them 1.9 billion US, but only has 167 million US.
In short, we will not see our money again.
The Caisse has misjudged its risk in this area with little or no regulation, a speculative bubble where the objective is to circumvent the traditional monetary system. She did not reflect on the ethical aspect. In addition, it bet on the wrong horse, which was already in the crosshairs of the authorities of the financial markets of certain American states.
As spectacular as it is, this error must be put into perspective, placed in context.
The Caisse made this investment from its $1.5 billion venture capital portfolio. Venture capitalists are like power hitters in baseball: they always hit the home run and are inevitably struck out more often. What matters is the batting average.
The Caisse’s venture capital portfolio has generated a return of between 35% and 40% per year for the past five years. The Caisse’s total return on all of its assets during this period: 8.9% per year. Venture capital is therefore very profitable for the Caisse.
In addition, the Caisse deploys only 0.36% of its assets in venture capital (1.5 billion out of 419.8 billion). It allows us to support our start-ups without putting the retirement of Quebecers at risk.
Quebecers will have some soul-searching to do with Celsius (lesson number one: stay away from crypto), but that shouldn’t stop them from continuing to invest in venture capital.
The Caisse invests in venture capital in about twenty techno companies (none in crypto, with the exception of Celsius), of which a little more than half are from Quebec. For a disaster like Celsius, there are several great Quebec techno hits like Lightspeed, Hopper and Nuvei. Don’t throw the baby out with the bathwater.
Moreover, another Quebec institution should rethink its relations with the crypto industry: Hydro-Quebec.
If the trend continues, the state-owned company will soon sell 1% of its electricity at a loss to cryptocurrency miners.
Making cryptocurrency is very energy intensive. Blockchain information must be mined using complex mathematical operations. It is the opposite of a financial system based on reliable and regulated financial institutions.
The state-owned company has a preferential rate three times cheaper (6¢/kWh instead of the industrial rate of 18¢/kWh) for a hundred Quebec cryptocurrency miners. They consume 111 megawatts, or 0.3% of the total network capacity.
But now, the Régie de l’énergie has just forced Hydro-Québec to offer cryptos another 270 megawatts at the preferential rate of 6¢/kWh.
For bitcoin miners, it’s beneficial to have access to low-cost electricity.
For Quebec, we are subsidizing an industry that has no economic spinoffs, has very little social utility, attacks the monetary sovereignty of countries, is not regulated, is used by criminal organizations to launder their money, and is very polluting.
Hydro-Québec must return to the Régie de l’énergie to find a way to overturn the decision made last fall. Otherwise, it will sell up to 1% of its electricity at a loss to cryptocurrency miners (it sells 6¢/kWh and any additional capacity will cost it 10¢/kWh in 2025).
It is difficult to ban cryptocurrency.
But we are not obliged to provide electricity at a discount. Nor to finance it with our woolen stocking.