Paraguay considers temporary cryptocurrency mining ban due to power burden issues
Key Takeaways
The ban will last for about six months, or until the National Electricity Authority (ANDE) ensures sufficient energy supply for cryptocurrency miners without affecting other users of Paraguay’s electricity system.
The proposed law aims to ban the creation, storage and trading of virtual assets, including cryptocurrencies, and ban the installation of cryptocurrency mining farms in Paraguay.
Paraguayan lawmakers have proposed a bill that would temporarily ban cryptocurrency mining and related activities in the South American country, citing concerns that illegal mining operations could drain electricity and disrupt power supplies. The bill, introduced by a group of Paraguayan senators, aims to address the strain on the power grid, particularly in regions such as Alto Paraná, which has seen a surge in cryptocurrency mining activity starting in 2022.
The surge in cryptocurrency mining activity after 2022 has led to increased scrutiny and action against the cryptocurrency industry in Paraguay. In recent years, Paraguay has emerged as an attractive destination for cryptocurrency mining operations due to its abundant and relatively cheap hydro energy. However, the surge in cryptocurrency mining activity has raised concerns about energy consumption and its impact on the country’s power grid.
The proposed bill seeks to ban the creation, storage and trading of virtual assets, including cryptocurrencies, and ban the installation of cryptocurrency mining farms on Paraguayan territory. It recommends a ban for more than five months, or until the National Electricity Authority (ANDE) provides an appropriate regulatory framework to support the energy-intensive needs of the cryptocurrency mining sector without jeopardizing the needs of other industries and the Paraguayan public.
Under the bill, violators may be subject to sanctions and other applicable administrative penalties in accordance with the Central Bank of Paraguay and regulations governing the country’s financial system. However, concerns have been raised about the broad language of the bill, particularly its definition of “storing” cryptocurrency and its potential impact on innovation in the cryptocurrency sector.
The proposed law follows recent steps by Paraguayan authorities to crack down on illegal cryptocurrency mining activities. Last March, government officials seized more than 1,000 cryptocurrency processing machines from a large-scale cryptocurrency mining facility in the town of Quindy.
Since 2022, Paraguay has been facing challenges due to illegal cryptocurrency mining operations taking advantage of low power rates. ANDE has sounded the alarm about these operations, which are taking energy from the grid without payment and causing monthly losses of $400,000.
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