- Paraguay considers a temporary crypto ban.
- Authorities cite negative consequences from mining activity.
- Mining advocates warn that a ban will have little effect.
Despite the innovative and economic benefits of digital assets, several countries have moved to hinder the sector and even enforce crypto bans, including China banning crypto trading and mining in 2021. Paraguay looks set to follow a similar path to China as the country grapples with the proliferation of illegal crypto-mining operations.
Paraguay Considers Crypto Ban
To combat illegal crypto-mining operations, the Paraguayan government has proposed a temporary crypto ban to prohibit the “creation, conservation, storage, and marketing” of digital assets within the country. Additionally, the legislation would ban the installation of cryptocurrency mining operations.
Paraguay has experienced a significant expansion of crypto-mining activity in recent years, largely driven by the country’s abundant and affordable hydroelectric power. However, much of this mining activity has occurred outside the law, with numerous cases of illegal electricity theft by shadowy mining outfits.
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According to Parguay’s national grid operator ANDE, each illegal crypto mine costs between $68,000 and $95,000 per month in damage and lost revenue, costing ANDE an estimated $60 million yearly. Additionally, illicit mining is stated as a contributory factor in persistent blackouts, negatively impacting Paraguayan families, businesses, and industries.
This proposal to combat illegal mining operations acknowledged that current legislation is insufficient to deal with the problem. While the Paraguayan Senate approved a bill to regulate crypto mining in July 2022, the president vetoed this just a month later.
This regulatory void has increased unregulated and often illegal crypto activity nationwide. Furthermore, critics warn that the proposed ban would work against the administration.
Ban Won’t Work
Critics of the proposed crypto ban argue that such a move would be nonsensical and counterproductive. Local crypto advocate Joaquin Morinigo said the crypto industry has been a boon for Paraguay’s government , generating tens of millions of dollars in revenue from energy VAT, import taxes on mining equipment, and “guarantees.”
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Morinigo also warned that a ban would do little to address illegal mining operations, which he foresees continuing unimpeded through bribery and government corruption.
Digital consultant BowTiedMara echoes Morinigo’s points, adding that cryptocurrency and mining have been key factors in Paraguay’s recent economic progress and poverty reduction and that the government should refrain from interfering with market forces.
On the Flipside
- Louisiana recently passed a bill guaranteeing the right to purchase, mine, and self custody Bitcoin.
- Human nature is such that banning something usually has the opposite effect as intended.
- Advocates argue that proof-of-work mining is beneficial as it uses “stranded energy” to stabilize the energy grid and drives the expansion of renewable sources.
Why This Matters
As Paraguay grapples with balancing innovation and oversight, a crypto ban may chart a path to unfavorable economic consequences.
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