President of Paraguay vetoes crypto regulation law

by · August 30, 2022

Paraguay’s president, Mario Abdo Benítez, vetoed a bill that sought to recognize cryptocurrency mining as an industrial activity. He believed that mining’s high electricity consumption could prevent the expansion of a sustainable national industry.

The decree stated that cryptomining uses intensive capital with low labor consumption, and therefore would not generate added value in line with other industrial activities. Worldwide, cryptocurrency is one of the biggest job creators. LinkedIn’s economic graph shows that crypto and blockchain jobs rose 615% in 2021 compared to 2020 in the US.

According to the bill’s sponsor, Senator Fernando Silva Facetti, the law aimed to promote crypto mining through the use of surplus electricity, but the Paraguayan government chose to ignore the activity in the country:

The Paraguayan Senate finally approved the proposal on July 14, recognizing cryptomining as an industrial activity. They established a 15% tax on its related economic activities, but the decree sees the brackets as an indirect incentive to the industry. It says:

“By subordinating the rate applicable to users of cryptominers to only a small percentage above the prevailing industrial rate, an indirect industrial incentive will be offered to cryptomining.”

According to the document, over the past twelve months, industrial investment has grown by 220% in the country to $319 million, while GDP increased by more than 4% over the past five years. If this rate continues, the national industry may require the total amount of energy produced and available in the country to remain sustainable.

“If Paraguay wants to intensify crypto mining today, in the next four years it will be forced to import electricity”, the decree says.

The bill approved by the Senate stipulates that miners must apply for a license and request authorization for industrial energy consumption. It also established the Ministry of Industry and Trade as the primary law enforcement authority and the Secretariat for the Prevention of Money Laundering or Assets to supervise crypto investment companies.

Low energy costs in Paraguay have spurred local and foreign companies to install mining infrastructure in the country since 2020. In December 2021, household electricity costs were $0.058 per kWh and business electricity costs were $0.049 per kWh, according to Global Gasoline Price Reports.