A recently proposed bill in Paraguay, if passed, could lead to an annual loss of over $200 million for the country’s economy by banning crypto mining. The bill was introduced on April 4 and claims that illegal cryptocurrency mines are stealing power and disrupting the electricity supply. The ban would last for 180 days or until new laws are enacted and the national power grid operator can ensure sufficient energy supply. However, banning lawful miners in the region could have costly consequences for Paraguay.
Jaran Mellerud, the co-founder and chief mining strategist of Hashlabs Mining, highlighted the significance of Bitcoin mining for Paraguay’s trade balance. This is particularly important considering Paraguay’s relatively small population of 6.8 million people and its ranking as the 94th-largest economy in the world, with a GDP of $41.7 billion, according to Worldometer’s 2022 data.
Currently, Bitcoin mining firms in Paraguay need to register and receive authorization from the Ministry of Industry and Commerce. Marathon Digital Holdings, one of the industry’s largest players, could be impacted by the bill as it deployed 27 megawatts around the Itaipu hydroelectric power plant in November.
The Itaipu Dam has become a popular location for miners due to its ability to supply all of Paraguay’s electricity needs and provide excess electricity. This excess electricity has historically been exported to Brazil at low prices, but Bitcoin miners have tapped into it at slightly higher prices in recent months. However, lawmakers claim that there have been 50 cases of interrupted power supply linked to cryptocurrency miners illegally using these electricity sources since February.
The National Electricity Administration of Paraguay estimates that each cryptocurrency mining operation has caused damages and losses of up to $94,900. In the Alto Paraná area, where the Itaipu power plant is located, annual losses could be as high as $60 million.
Mellerud acknowledged that illegal mining operations can be harmful to the grid if they draw too much electricity from low voltage lines. Kazakhstan faced a similar situation a few years ago, leading to the government cracking down on the industry and expelling illegal mining operators from the country.
Mellerud previously mentioned that Paraguay and Argentina would likely attract an influx of miners from the United States looking to expand or relocate to these energy-rich nations due to lower electricity costs.
The controversy in Paraguay arises as Bitcoin miners prepare for the upcoming Bitcoin halving event, scheduled for April 20. This event will reduce miner rewards from 6.25 BTC ($434,000) to 3.125 BTC ($217,000).
In conclusion, if the bill to ban crypto mining is passed in Paraguay, it could have severe economic consequences for the country.