The U.S. Securities and Exchange Commission (SEC) is challenging carbon credits.
That’s according to Kevin O’Leary, who chatted with Benzinga while filming Shark Tank. The renowned investor explains that an SEC-mandated “audit of carbon credits” made publicly-listed cryptocurrency miners way too risky for him.
That’s what promoted a “dramatic decline” in their stock prices preceding this year’s “correction in the price of Bitcoin (CRYPTO: BTC),” he says. “The sovereign and pension plans figured it out right away. The audit firms will not sign offsets because there’s no ledger for carbon credits — it is BS to suggest buying acres of the Amazon will make your Bitcoin mining operation clean.”
With Bitcoin miners “in the penalty box,” while demand for cryptocurrency mining and data centers is expected to continue growing, O’Leary sought to deploy funds in operations that were climate-focused.
“That’s when I met Akbar Shamji of Bitzero,” he says.
Shamji & Bitzero
Shamji is the founder, chairman and CEO of Bitzero, a 100% renewable data center developer. His experience in clean energy development dates back to his advisory work with governments on vision plans for net-zero emissions and carbon reduction plans.
“There was a lot of renewable energy development and generation initiatives, in parallel with the government of India policy, we helped draft," he says. "The challenges, though, included subsidies taken out by big industry to develop coal-fired power plants to power their industry by night.”
“Solar by day, coal by night” netted amazing results for society and created a new middle class, Shamji puts forward. Notwithstanding, “temperatures rose and some people suffered.”
That inspired action against “the biggest beast coming toward us, which is data,” and, ultimately, took Shamji to Norway where he’s building Bitzero into one of the biggest miners because that is where “temperatures are cold” and infrastructures have been built to tap into “trapped power.”
“As soon as low voltage energy was available, there, we built containerized Bitcoin mining with all containers performing better by hash output, per ASIC capacity installed, than anything on the global network,” Shamji explains.
After “proving the concept and hitting revenue,” the Bitzero team is now seeking to expand its model to new locations and applications like data centers, as well as using heat generated to bolster “greenhouse farming and agriculture.”
Bitzero In The U.S.
Shamji took a moment to reflect on the opportunity to work with O’Leary.
“Kevin took time to understand it,” Shamji says at the joy this relationship with the O’Leary team has brought him. However, “that is at the same time upstate New York announced a three-year ban on Bitcoin to do an environmental study.”
That, in short, is bad news as “everybody freezes, including investment,” Shamji says.
O’Leary quickly got to work at the policy level, speaking with the likes of Republican leaders like Senators Cynthia Lummis of Wyoming and Pat Toomey of Pennsylvania. He also spoke with North Dakota Governor Doug Burgum, an entrepreneur and philanthropist in his own right.
“In North Dakota, we found an incredibly forward-looking government with teams sitting on top of unique global geology around carbon capture and sequestration,” Shamji says.
O’Leary’s Thesis
“Policy has a direct impact on investing," O'Leary says.
Knowing that “the SEC is calling BS on carbon credits,” through a “disconnect” on data centers, which can be adapted to mine Ethereum (CRYPTO: ETH) or service Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) and Amazon Inc (NASDAQ:AMZN), it makes sense to invest in clean in concepts like Bitzero, where the returns may net upwards of “14% in perpetuity.”
“You’ve got to be where the puck is going, as Wayne Gretzky said,” O’Leary added. Bitzero's investments are attractive because they are “cooperative and pro-business government, clean energy, and have an unlimited amount of customers that want access.”
O’Leary considers it his duty to “promote entrepreneurs like Akbar that understand it, find capital for him, invest myself, as well as with our own funds, and find the path of least resistance.”
Nekoma's Pyramid
When asked further about Bitzero's clean energy work in data centers and cryptocurrency mining, Shamji points to Nekoma, North Dakota’s “The Pyramid” — an abandoned Cold War-era military installation that is “nuclear- and EMP-proof.”
Bitzero recently agreed to acquire “The Pyramid” with the intention of turning it into a computing and data processing facility. Waste heat captured from the center’s servers would heat an on-site greenhouse.
“If a small bank or government body needs a Tier 5 data center, but doesn’t qualify for the big national security stuff in Virginia,” they can come to Bitzero, Shamji notes. “There will be no shortage of clients.”
The Hare & The Tortoise
Unlike its competitors who are “burdened with debt over machines,” as well as pricey operating expenses, Bitzero is isolated.
“We’re the tortoise winning," Shamji says.
Through the use of facilities like “The Pyramid,” the initial costs are high. However, when it comes to mining, costs may be a third, and equipment will last for years if “not overclocked.”
That’s a part of the “winning formula from a climate perspective and commercially,” Shamji adds. The capital expenses on the way in are “heavy,” but lower operating expenses make it up.
Pro-Crypto Washington
O’Leary is optimistic about policy coming from Washington. Policymakers, on all sides, are “pro-crypto, payments and stablecoins," he says.
“The reason both sides would support stablecoins is that it would make the U.S. dollar the default currency, globally. If a stablecoin backed by the U.S. dollar and Treasury bills was regulated as a payments system,” that may spur interest by “sovereign wealth funds and financial institutions.”
Until there’s clarity on the policy front, Bitcoin likely remains under pressure.
“There’s no bid for it,” O’Leary ended. “I’m encouraged that, over the next 18 months, we may have policy, and I think that will be well reflected in the valuations of firms like Bitzero, particularly ones that know how to provide an ESG solution for large institutions.”
Benzinga wishes to thank O’Leary Ventures’ Nancy Cheung for arranging this conversation.
