Fitch Ratings warns of risks crypto miners pose to US power supply

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Global credit rating agency Fitch Ratings is warning electric utilities across the United States to mitigate the risk that crypto mining may post their power output.

In an advisory on Monday, Fitch Ratings said only utilities in states like Washington, which have excess generating capacity, may be able to meet the power needs of many crypto mining operations. The agency claimed that while some crypto-mining firms can become “the largest customer in a rural service territory,” the operations typically bring “very little incremental economic benefit” through jobs or stimulation. of the local economy.

“The volatile and unregulated nature of cryptocurrency mining and the large influx of load requests led a number of Washington utilities to adopt new practices beginning in 2014 to mitigate exposure to entities cryptocurrency mining, including cryptocurrency loading moratoriums, evolving fee structures to capture the risk of leaving a high-risk industry, and defined customer concentration limits,” said Fitch Ratings.

In Texas, where many mining operations have settled following a corporate exodus to China, Fitch Ratings has suggested utility companies invest in new facilities, sign power purchase agreements long-term electricity or obtaining electricity through real-time market purchases to manage additional costs. load. However, each option carries a financial risk that may eventually be passed on to residents:

“Crypto-mining operations are price-sensitive entities that can be quickly scaled down or shut down if mining becomes unprofitable.”

Many crypto mining companies look for the most profitable area to mine tokens, with some US states, including Texas and Washington, offering more favorable terms than others. Canadian mining company Bitfarms announced in November that it planned to build a data center in Washington state, citing its “profitable electricity” and production rates. Whinstone, later acquired by Riot Blockchain, moved to Texas, taking advantage of wind turbines and the state’s deregulated power grid.

Related: Texas Bitcoin Mining Power Demand Could Jump 5 Times By 2023

Fitch Ratings previously issued warnings related to the use of cryptocurrencies like Bitcoin (BTC) in local economies. In August, shortly before El Salvador implemented its Bitcoin law making the crypto asset legal tender, the agency warned of volatility and operational risks for citizens using crypto, adding that local insurance companies would likely be hesitant to adopt BTC for claims or benefit payments.

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