Paraguayan legislators have introduced crypto legislation that addresses taxation and cryptocurrency mining. Electricity costs for mining would have been capped under the proposed legislation.
Paraguay is no longer safe haven for cryptocurrency miners as lawmakers reversed a crypto law that would have protected the industry. After much deliberation, the country finally opted against passing crypto regulations on December 5.
Both a tax system and a regulatory framework for the asset class were to have been established by the proposed legislation.
The inability of miners to take advantage of the country’s low-cost energy is the single most significant effect of the retreat. Bitcoin, according to former Paraguayan president Mario Abdo Benitez, was too energy-intensive and not economically beneficial enough. This year marks the second passage of the bill.
Despite having overridden the president’s veto, the lower house of parliament in Paraguay, the Chamber of Deputies, archived the bill on Monday. There were 36 votes cast, five short of the necessary 41 to pass the bill.
The proposed legislation included a tax on miners and a limit on the amount they could be charged for electricity. Bitcoin miners would have been very interested in this.
Due to its low electricity costs and robust hydroelectric network, Paraguay remains a popular location for bitcoin mining. Bitfarms, for one, has a physical presence in the country after signing a lease agreement to acquire 10MW of power over the course of five years.
Legislators don’t think the system can handle the extra people and traffic, another reason the bill was shot down. Likewise, Ande, a local grid operator, is opposed to the bill and has asked the government to raise miners’ tariffs by 60%.
Bitcoin miners, whose energy needs have garnered attention around the world, have always had an interest in inexpensive energy. Mining for bitcoin has been banned in countries like China, where energy is cheap, forcing miners to look elsewhere.
Investors in the mining industry often look to the Middle East as a potential location. A number of neighboring countries offer very low electricity rates. In Kuwait, for instance, the price of 1 kWh is only 3 cents. Nonetheless, regional nations are also drafting their own regulations that will affect the mining sector.
Cryptocurrency miners celebrated when they heard that Paraguay would introduce incentives for mining. As a net exporter of electricity, the country ranks #4 globally. An “industrial and innovative activity,” the mining of cryptocurrencies was referred to in the bill.
A number of Paraguayan legislators and government agencies are opposed to the bill because they see cryptocurrency as a potentially dangerous investment. Without careful deliberation, it’s unlikely that any crypto regulations will be implemented.
Cryptocurrency businesses thrive in South America. Panama, Argentina, and Uruguay are also attempting to draft regulations pertaining to the crypto asset class.
