To Ban, or Not to Ban: Paraguay Reconsiders Bitcoin Mining

Paraguayan government officials are revisiting a Bitcoin mining ban that was introduced into parliament just over a week ago, on April 3rd. The draft initially proposed a 180-day ban, citing "the installation of crypto mining farms" as well as prohibiting "the creation, conservation, storage and commercialization" of cryptocurrencies. The bill would serve as a temporary stopgap until comprehensive legislation is drawn up.

In this latest news, however, a public hearing on the issue, scheduled for April 23rd, hopes to weigh up other options.

The chief argument for the proposed ban was to halt the impact mining is having on its famously abundant hydroelectric power supply. In one region alone, lawmakers have linked 50 blackouts to illegal connections by crypto miners. These power disruptions were directly impacting citizens' lives.   

Paraguay is not the only country weighing its options. Iceland has also grappled with balancing the needs of citizens with the rise in crypto mining on its shores. In an interview with the Financial Times, Katrín Jakobsdóttir, Prime Minister of Iceland, said the country was on a mission to achieve carbon neutrality and that renewable energy should be reallocated to power the 375,000 citizens of Iceland. Jakobsdóttir added that Bitcoin and cryptocurrency, which use "a lot of energy," were "not part of that mission."

Despite the issues, the ban has proved controversial. In an April 8^th letter to Congress, Senator Salyn Buzarquis suggested there were considerable financial benefits to be had from selling excess energy to licensed Bitcoin miners. He claims the move could end up generating up to $73 million dollars annually. Buzarquis urged the "executive power… to study in-depth the economic advantages of selling our surplus energy to the crypto industry."

In this latest news, the government appears to have heeded that suggestion. The debate announced in parliament by Senator Lilian Samaneigo yesterday hopes to weigh up the pros and cons of a mining ban, which will ultimately lead to a decision after years of back and forth.

In 2022, the Paraguayan Senate passed a tax and legal framework bill to try to regulate crypto, but the then-president vetoed it just a month later. This regulatory hole has left illegal crypto activity to thrive nationwide.

This is a critical juncture for Paraguay on cryptocurrency. Their next move could signal an embrace of the industry or begin the process of shutting it down completely. Miners based in the country will be waiting eagerly for a positive outcome on April 23. In the meantime, the critical Bitcoin halving event is looming, scheduled for April 19^th.