Caisse depot et placement du Québec did not fail to invest around DKK 200 million in the American cryptocurrency bank Celsius.
Written at 9:00
She is royally planted.
Last October, the Caisse became a shareholder in Celsius, a bank that offered cryptocurrency loans and interest rates 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 won’t see our money again.
The Caisse has misjudged its risk in this area of little or no regulation, a speculative bubble where the aim is to bypass 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 in the financial markets of certain US states.
As spectacular as it is, this error needs to be put into perspective, placed into 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 home runs and inevitably get struck out more often. What matters is the batting average.
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 its assets during this period: 8.9% per annum. Venture capital is therefore very profitable for the Caisse.
In addition, the Caisse uses only 0.36% of its assets in risk capital (1.5 billion out of 419.8 billion). It allows us to support our start-ups without jeopardizing the retirement of Quebecers.
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), a little more than half of which are from Quebec. For a disaster like Celsius, there are several big Quebec techno hits like Lightspeed, Hopper and Nuvei. Don’t throw the baby out with the bath water.
Furthermore, another Quebec institution should reconsider 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 use 111 megawatts, or 0.3% of the total network capacity.
But here it is, the Régie de l’énergie has just forced Hydro-Québec to offer cryptos of another 270 megawatts at a preferential rate of 6¢/kWh.
For bitcoin miners, having access to low-cost electricity is an advantage.
For Quebec, we are subsidizing an industry that has no economic spin-offs, has very little social utility, attacks countries’ monetary sovereignty, is not regulated, is used by criminal organizations to launder their money, and is highly 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 supply electricity at a discount. Nor to finance it with our woolen stockings.