FameEX Hot Topics | Paraguay Proposes Short-Term Crypto Mining Moratorium to Combat Grid Disruptions by Unlawful 'Farms'

Paraguayan lawmakers are taking steps to mitigate the detrimental impact of unauthorized cryptocurrency mining by proposing a bill for a provisional halt on such activities. The legislation, introduced on April 4, aims to temporarily stop the establishment and operation of cryptocurrency mining farms and the associated processes of creating, maintaining, storing, and selling digital currencies. This includes a particular emphasis on the regulation of crypto staking and wallet services, highlighting a comprehensive approach to curb the unauthorized use of the country's electricity.

The bill outlines a provisional ban lasting 180 days or until the enactment of detailed legislation, contingent upon the National Electricity Administration (ANDE)'s confirmation that the power grid can sustain the energy demands of sanctioned crypto mining activities without jeopardizing the electricity supply for the rest of the nation.

The initiative addresses the significant rise in crypto mining operations migrating to Paraguay, attracted by the ample hydroelectric power, especially in the Alto Paraná region. This area, powered by the Itaipu Dam, one of the world's most substantial hydroelectric facilities, has seen an upsurge in miners exploiting the low-cost energy. However, this has led to numerous disruptions in the power supply since February, due to illegal grid connections by miners.

ANDE's analysis reveals that each unauthorized mining operation could cause financial losses estimated at around $94,900, with the annual losses in the Alto Paraná region potentially totaling $60 million. The proposed law aims to bring much-needed regulatory oversight to the crypto mining industry, addressing the legal void that currently presents risks such as lack of consumer protection and potential for money laundering and tax evasion.

This legislative push follows a thwarted attempt in 2022 to implement a legal and tax framework for the cryptocurrency and mining sector in Paraguay, vetoed by then-President Mario Abdo Benítez due to concerns over the energy-intensive nature of mining activities. The suggested temporary ban signifies a focused effort to resolve the pressing issues caused by illegal mining and lay the groundwork for a regulated, sustainable future for the industry. It reflects a desire to safeguard Paraguay's electrical infrastructure and economic interests amidst the rapid growth and technological evolution of the global cryptocurrency market.

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