Paraguay’s Lawmakers Set to Reevaluate Bitcoin Mining Prohibition and Energy Supply to Miners

Jimmy Aki
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Paraguayan lawmakers suspended a proposed bill to ban Bitcoin mining as they weigh the economic value of redirecting excess energy from the Itaipu hydropower plant to crypto miners rather than exporting it to Brazil and Argentina.

A public hearing scheduled for April 23 is expected to weigh the pros and cons of Bitcoin mining in the country.

Paraguay’s Lawmakers Explore Economic Benefits of BTC Mining

Senator Lilian Samaniego, a Paraguayan lawmaker, confirmed this development in a Senate session on April 10.

Following the suspension, the lawmakers will evaluate the economic benefits of selling energy to local miners against exporting to neighboring countries, she explained. The decision also involves evaluating potential blowbacks from the ban reversal.

This latest U-turn came after a draft law was introduced by Paraguay’s senatorial chamber at the National Congress on April 3, 2024. The bill proposed a temporary 180-day ban on Bitcoin mining in response to the rising illegal activities that reportedly disrupted the country’s power supply.

Paraguayan Bitcoin enthusiast Joaquin Morinigo was among the first X users to post comments about the potential law. He noted the ban on the Bitcoin industry is pointless as it generates millions of dollars for the government and represents a unique opportunity to obtain energy sovereignty.

In response to the views and comments from mining and crypto enthusiasts in the region, Paraguay’s lawmakers suggested a more economic-oriented approach through the approval of a declaration to support local and foreign investment infrastructures.

Senator Salyn Buzarquis addressed a letter to the country’s National Congress on April 8, highlighting the financial benefits of selling excess energy to Bitcoin miners while reiterating that the 45 licensed Bitcoin mining operations in the country would contribute $48 million to the National Electricity Administration (ANDE) by 2024 and an expected rise to $125 million in 2025.

With electricity production costs at Paraguay’s Itaipu hydropower plant at approximately $22 per megawatt-hour (MWh), ANDE could achieve a 45% net profit margin by selling excess energy to local Bitcoin miners at $40/MWh.

Senator Buzarquis noted that power sales to miners could further equate to $73M annually and about $17M in value-added tax (VAT) for the nation’s treasury.

This review of the initial ban on Bitcoin mining comes at a time when the crypto industry is gearing up for the Bitcoin halving event that is scheduled for April 20, which will reduce miner’s rewards by half.

Industry-leading stakeholders like Marathon Digital Holdings, which has invested in mining operations close to Paraguay’s Itaipu plant, have set their eyes on the event for potential opportunities.

Insights into Paraguay’s Bitcoin Mining & Energy Industry

Paraguay stands out in the Bitcoin mining sector, as it is one of Latin America’s most attractive destinations.

However, data from the World Economic Forum and the United Nations Development Programme ranks the Latin American country among the world’s leaders in clean energy production. The country has nearly 100% hydroelectric generation capacity and operates two major binational dams with Brazil (Itaipu) and Argentina (Yacyreta).

This green and renewable energy source offers cheap electricity and aligns with the increasing investors’ interest in renewable energy.

If the proposed mining restriction law is enacted, it could lead to a decline in the Bitcoin mining industry and adversely affect cryptocurrency users in Paraguay.

Paraguay’s lawmakers have made previous attempts to regulate crypto activities.

In 2022, the legislators proposed a similar cryptocurrency and mining law. The proposal was subsequently discarded after failing to gather enough support votes to override the President’s veto.

Paraguay is not the only country where there are conversations about crypto mining. US President Joe Biden had proposed a crypto mining tax in his budget for 2025.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.