Cryptocurrency mining, wherever you want, except in Paraguay!

The president of Paraguay is opposed to cryptocurrency mining in his country. He believes that it is an industry that wastes a lot of energy without creating enough jobs for citizens. Mario Abdo Benítez thus puts an end to the aspirations of the Senate, which had approved a law allowing cryptocurrency mining.

Mario Abdo Benítez vetoes bill allowing mining in Paraguay

In a decree signed on August 29, Paraguayan President Mario Abdo Benítez vetoed a bill to recognize cryptocurrency mining as an industrial activity in the country. This decision was made after consultation with the central bank, the public electricity authority as well as the Ministry of Commerce.

There were two major reasons for Mario Abdo Benítez‘ decision. First, he is concerned that the electricity consumption resulting from mining will impede sustainable and inclusive industrial expansion. He also believes that mining uses a relatively small workforce, unlike other industrial activities.

The bill was therefore sent back to parliament for reopening debate on the subject.

Mario Abdo Benitez’s veto divides Paraguay

Reactions to the President’s decree were swift. Fernando Silva, one of the senators who carried the bill banned by the president has strongly criticized the decision of the latter for several reasons.

According to him, cryptocurrency mining is an activity already underway in Paraguay and will likely continue. As such, the Paraguayan president’s veto will just deprive this industry of regulatory oversight. The lack of legal protection could also make it difficult for miners to access the financial system.

In addition, Senator Fernando Silva believes that the mining ban “destroys the possibility of the arrival of new investors and the formalization of hundreds of small and medium-sized enterprises that live and depend on this industry.”

Finally, Fernando Silva considers that the decision of the Paraguayan president reflects a “lack of vision of the State”. Indeed, Paraguay produces an important surplus of electricity. The surplus energy is sold to Brazil and Argentina at a derisory price.

Even worse, the veto denies the possibility of fiscal and financial transparency, which shows the lack of vision of the state. Paraguay will continue to give its energy to Brazil and Argentina at a price lower than what Paraguayans would pay here.

Fernando Silva, Senator in Paraguay

For its part, TEDIC, an organization that defends and promotes human rights online, celebrated the veto of President Mario Abdo Benitez.

For TEDIC, the law project n°6962/2022 enshrines a glaring inequality by benefiting a minority of rich investors. Thus, the organization called on the Senate to support the veto by adopting in a participatory manner a law that addresses environmental, economic, legal and other important concerns.

Ambitious law falls through

On July 15, after a heated debate, the Paraguayan Senate passed Law No. 6962/2022 regulating the mining, commercialization, intermediation, exchange, transfer, custody and administration of cryptocurrency or instruments that enable the control of digital assets.

This law was ambitious and revolutionary in many ways. Indeed, it explicitly allowed excess energy generated in Paraguay to be used by cryptocurrency miners at competitive prices instead of being given away at low prices to Brazilian and Argentine industry.

The law even called for the National Electricity Administration (ANDE) to define commercial parameters, technical conditions and special prices for cryptocurrency mining of up to 15% of the regular electricity rate.

Beyond mining, this law provided for an exemption on tax payments on capital gains recorded on assets held by crypto companies operating in Paraguay.

These significant advances could have boosted the adoption of cryptocurrencies in the country. But the president’s veto buries that prospect. Instead, it will cause the continued sell-off of Paraguay’s energy resources to its two neighbors while denying its own citizens the opportunity to be at the forefront of the Web3-driven revolution.