It might be a relatively harmless and money-losing affectation for a former talk radio show host turned business group lobbyist to have a mid-life conversion to the church of cryptocurrency. It becomes a lot less harmless when that person becomes the premier, can tell Alberta’s pension fund manager what to do and wants to take Alberta out of the Canada Pension Plan.
And Danielle Smith really is cuckoo for cryptocurrency.
“This is more than an asset, it’s a spiritual philosophy. I think that’s what we’re looking for, is some kind of counter to this government knows best [mentality], that they can step in an interfere with every aspect of your life, seemingly without impunity,” said Smith about cryptocurrency on her April 20, 2022 show broadcast on the Western Standard’s website.
On that same show she read from a ZeroHedge article. “Bitcoin is well past the here to stay phase. You need to be aware that bitcoin is going to be with us,” said Smith.
These statements were made by Smith before the collapse of FTX, the world’s second-largest cryptoexchange, in November 2022 or the collapse of Celsius, a crypto lender in July 2022. Smith has also spoken openly about losing money in crypto. “As you know, I’ve been investing in cryptos since 2016, lost my investments in the Quadriga collapse,” said Smith in an April 17, 2022 newsletter.
Quadriga was a cryptoexchange that was found to be a fraud and a Ponzi scheme by the Ontario Securities Commission. Smith lost her money because Quadriga’s founder died in December 2018 while on his honeymoon in India and no one else had the passwords necessary to access and run the site. Quadriga users reported roughly $190 million in missing cryptocurrency. Smith talked on her Western Standard show about how the loss was closer to $250 million.
Smith has also said that she has investments in Ethereum, the second largest cryptocurrency after Bitcoin. Smith’s public disclosure that details her investments and is published by the office of the ethics commissioner is not yet available.
But it’s not just crypto that Smith is obsessed with, it’s also your pension. In December, Smith floated the idea of having a referendum on separating Alberta from the Canada Pension that would line up with the upcoming provincial election, before quickly backtracking the next day on having a referendum in May.
And the idea of the Alberta Pension Plan is one that has been floating around conservative circles since the days of the Alberta firewall letter. While politically it makes sense to not tie your election hopes to an incredibly unpopular idea if Smith does win the next election the Alberta pension plan idea is certainly on the table.
So why is the fact that Danielle Smith a cryptobug who also wants to take Alberta out of CPP relevant? Because of the outsize control the premier and cabinet have over AIMCo, Alberta’s pension fund manager especially when compared to the federal government’s influence over the Canada Pension Plan Investment Board (CPPIB).
You might know AIMCo as the pension fund manager that famously vaporized $2.1 billion (and likely far more) in a single trade but it’s also a pension fund manager that’s far more vulnerable to political interference when compared to the CPPIB.
The government and AIMCo work together to decide on things like committee structures as well as financial, administration and staffing arrangements. And since AIMCo is an agent of the government of Alberta, it is subject to direction by the finance minister. The board of directors are political appointees put there by the government of the day. And most troubling, within the AIMCo Act is a section that allows the government to issue directives to AIMCo. In the case of one of these directives being issued, the government appointed board shall ensure it is "implemented in a prompt and efficient manner."
In 2020, I released a report detailing more than $1.1 billion worth of risky investments by AIMCo into oil and gas firms with many of those investments connected to the Alberta Growth Mandate directive instituted by the Alberta NDP in 2015. Of the 32 separate investments made under the Alberta Growth Mandate that we know about, 24 were in the oil and gas sector, five in real estate, one in agriculture and one in renewable energy.
The federal government can issue no such directive to the Canada Pension Plan Investment Board. There are extraordinary safeguards built into the system to stop things like that from ever happening. If a politician even attempts to contact a CPPIB board member, it must be reported. If the federal government tries to change the legislation governing the CPPIB, it needs more buy-in than you would otherwise need to amend the Constitution.
So far the only publicly known investment that AIMCo has made in a company involved with cryptocurrency is Razor Energy, a small oil and gas company diversifying into crypto mining. But other pension funds have made big crypto investments and done poorly. The Ontario Teachers' Pension Plan lost more than a $100 million on its investment in FTX. The Quebec pension fund lost more than $200 million after the Celsius crypto network went bankrupt in 2022.
But Danielle Smith has big plans for crypto in Alberta. She thinks that crypto mining is going to be around for the next 120 years and that Alberta’s cheap and abundant natural gas should be used to mine cryptocurrency as their power demands go up.
“It seems to me that we have the perfect model in Alberta. We can establish hubs with Bitcoin mining operations and have off-grid power generators powered by natural gas that allows us to establish our own electricity… It also gives us a brand new industry for us to attract all of the best and brightest minds of the world,” says Smith on her April 20, 2022 Western Standard show.
“When we talk about diversification, isn’t this exactly what we’ve been talking about? It’s not retraining all of our energy workers to learn how to install solar panels, it's using our traditional industries and the wealth generated from it to attract and create new industries. This marriage of this new high-tech, emerging world not just on Bitcoin but with all the attendant technologies associated with it… My friends, I think this is the answer. I think it’s a way for us to just get going on keeping our energy economy revved without having to constantly rely on a hostile series of decisions coming from Ottawa that keeps on putting barriers in our way. So I want you to think about it.”
This model of off-grid crypto mines directly connected to old oil and gas wells was done in 2021. A company set up a cryptomine secretly in Sturgeon County outside of Edmonton and was only found out because neighbors could hear the high pitched whine of the computer servers and the natural gas generator.
Draining every crappy gas well in Alberta dry in order to mine a resource that is both not real and 99 per cent a scam would be catastrophic from both a climate perspective and for Alberta. Giving Danielle Smith around $100 billion of pension money to play around with could bankrupt us all.
I do want to end on one note of optimism however, on Dec. 7 2022, the Canada Pension Plan decided it would stop its investigation into cryptocurrency and not invest in the space.
That’s reason enough to stick with the CPP.