Paraguay Tempers Crypto Boom with Proposed Mining Suspension

Paraguayan lawmakers propose a bill to temporarily ban crypto mining and related activities, including crypto staking and wallets, due to concerns over illegal mining operations stealing power and disrupting the electricity supply. The 180-day ban aims to address the proliferation of crypto mining farms in the Alto Paraná region, which reportedly attracted by abundant hydroelectric energy and have caused power outages.

Paraguay Proposes Temporary Ban on Cryptocurrency Mining and Activities

Asunción, Paraguay - Paraguay's legislature has introduced a bill seeking to temporarily prohibit cryptocurrency mining and related activities within the nation's borders. The proposed law, presented on April 4th, aims to address concerns over illegal crypto mines allegedly responsible for power theft and disruptions in electricity supply.

The draft legislation encompasses a wide range of crypto-related activities, including "the installation of crypto mining farms," "the creation, conservation, storage, and commercialization" of cryptocurrencies, and "the creation of new crypto assets." The scope of the ban also extends to "the conservation and storage activities of crypto assets," effectively targeting crypto staking and wallets.

The proposed ban would remain in effect for 180 days, approximately six months, or until a comprehensive law is enacted and the National Electricity Administration (ANDE), the country's power grid operator, assures sufficient energy supply to crypto miners without compromising the electricity needs of other Paraguayan consumers.

The draft highlights the "significant boom" in crypto mining operations within Paraguay, citing the nation's "abundant hydroelectric energy" as a major attraction. The Alto Paraná region, located in the southeast of the country and bordering Brazil and Argentina, has emerged as a hotspot for crypto miners. Notably, the region hosts the Itaipu hydroelectric dam, the third largest in the world, which supplies all of Paraguay's domestic electricity requirements.

According to the draft, 50 cases of interrupted power supply have been linked to crypto miners illegally connecting to the grid in the Alto Paraná region since February. ANDE estimates that each "crypto mining farm" incurs approximately $94,900 (700 million Paraguayan guaraníes) in damages and losses. The annual estimated losses in Alto Paraná could reach up to $60 million (420 billion Paraguayan guaraníes).

Proponents of the proposed ban argue that crypto regulation would enable Paraguay to enhance industry oversight. They contend that the current legal vacuum surrounding digital assets has created challenges, including a lack of consumer protection and potential involvement in money laundering and tax evasion.

In 2022, Paraguay nearly passed a tax and legal framework for the crypto mining and crypto sector. However, then-president Mario Abdo Benítez vetoed the legislation, citing concerns that the high power consumption associated with mining could hinder the development of a sustainable energy system.

The proposed temporary ban on crypto mining and related activities has sparked mixed reactions. While some industry insiders view the measure as a necessary step to address illegal operations and protect the electricity supply, others express concerns about the potential impact on legitimate businesses and innovation in the blockchain sector. The bill is currently under review by the Paraguayan Congress, and public consultations are expected to take place before a final decision is made.