In a move that could have significant economic repercussions, Paraguay is considering a bill that would impose a ban on cryptocurrency mining, potentially stripping the country of over $200 million in annual revenues. This proposal, introduced by lawmakers on April 4, is motivated by concerns over illegal crypto mining operations allegedly disrupting the national electricity supply.
The Economic Stake
The draft legislation suggests a temporary halt of 180 days on crypto mining activities or until new regulatory frameworks are established to ensure the national grid's capacity to meet energy demands. Jaran Mellerud, co-founder and chief mining strategist at Hashlabs Mining, voiced concerns to Cointelegraph about the economic ramifications of such a ban, emphasizing the substantial contribution of Bitcoin mining to Paraguay's trade balance.
Given Paraguay's modest population of 6.8 million and its ranking as the 94th largest economy globally, with a GDP of $41.7 billion in 2022, the potential loss of $200 million from legal mining operations presents a notable financial challenge. Mellerud highlighted that the country hosts about 500 megawatts of legal mining operations, contributing significantly to its economy.
Registration and Regulation of Mining Operations
Currently, Bitcoin mining entities in Paraguay must undergo a registration process and obtain authorization from the Ministry of Industry and Commerce. The contemplated ban could significantly impact major industry players, including Marathon Digital Holdings, which initiated a 27-megawatt operation around the Itaipu hydroelectric plant in November last year.
The Itaipu Dam, a crucial electricity source for Paraguay and a surplus exporter to Brazil, has attracted Bitcoin miners due to its abundant excess power. Mellerud pointed out the influx of miners offering higher rates for this electricity, traditionally sold to Brazil at lower prices.
Concerns Over Illegal Mining Activities
The draft bill comes in response to reports of illegal mining operations tapping into the power supply, causing disruptions. The National Electricity Administration reported 50 incidents of power supply interruptions since February, attributed to illicit mining activities. These disruptions have led to considerable financial losses, estimated at $94,900 per incident, with total annual losses in the Alto Paraná area, home to the Itaipu plant, potentially reaching $60 million.
Looking Ahead
As the Bitcoin mining community braces for the upcoming Bitcoin halving event on April 20, which will reduce mining rewards by half, Paraguay's legislative decision could reshape the landscape for miners in the country and beyond. With energy-rich nations like Paraguay and Argentina previously considered attractive destinations for miners, especially those relocating from the United States due to lower electricity costs, the proposed ban could significantly alter the dynamics of the global Bitcoin mining industry.
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“