Paraguayan president Mario Abdo Benítez has rejected a bill designed to regulate digital asset activities in the country, including commercial crypto mining, through a decree.
President Benítez cited the high energy consumption required for crypto mining as the reason behind the veto. He also argued that it did not create as many job opportunities as other industries. The proposed bill read that crypto miners were required to pay higher electricity fees, with the rate capped at 15 percent above other industrial sectors.
Benítez said the clause was an “indirect industrial incentive” to the crypto industry. He argued that Paraguay’s industrial investment had grown 220 percent last year, collecting $319 million in income. His decree also noted that the country’s economic activity increased by four percent in five years. Therefore, the demand for energy will grow in the future, even without the crypto mining industry.
“If Paraguay wants to intensify crypto mining today, in the next four years, it will be forced to import electricity,” the decree said.
Por Decreto N° 7692 el Poder Ejecutivo objeta totalmente el proyecto de ley que busca regular la criptominería en el país 👉 https://t.co/sDHUERhUe1 pic.twitter.com/VpgQij4AFh— Presidencia Paraguay (@PresidenciaPy) August 29, 2022
In the decree, President Benítez emphasized that his decision to veto the bill came after discussing the issue with the ministry of trade, the Paraguayan central bank, and the national electricity administration.
The Paraguayan senate passed the bill in the middle of July. In response to the crypto bill, Félix Sosa of Paraguay’s National Electricity Administration (ANDE) showed his concerns earlier in August. Sosa suggested that the president partially vetoed the bill.
Reaction to bill rejection
President Benítez’s rejection of the bill invited reactions from the senate. Senator Fernando Silva Facetti, who sponsored the bill, said that the government showed a “lack of vision.'' Facetti explained that the veto could prevent the crypto mining industry from developing.
“The executive washes its hands and does not accept mining as an industry that generates resources and sources of work but operates in a grey area without being able to access the financial system or establish regulations that guarantee the investor, the consumer, and the State,” Facetti said.
The crypto legislation started last year as a private member’s bill and was developed together with crypto miners in Paraguay. According to the proposal, crypto miners needed to be authorized for industrial energy consumption. It also listed the Ministry of Industry and Commerce as the main body regulating the activity and the Secretariat for the Prevention of Money or Asset Laundering as the organization supervising crypto asset companies in the country.
Low energy costs as main motivation
The low energy costs in Paraguay were the main driver behind the devlopment of the crypto mining industry in the country. Paraguay utilizes hydroelectric plants to generate electrical power, creating a surplus of energy that drives the price down. In December 2021, households only paid $0.058 per kWh for electricity, while businesses paid $0.049 per kWh.
Reports suggested that local and foreign firms began setting up crypto mining infrastructure in Paraguay in 2020. In the last two years, Paraguay has shown one of the most significant growth in Bitcoin mining among Latin American countries.
The veto showed the varying attitudes toward the crypto industry within the Latin American region. The El Salvadoran government legalized cryptocurrencies as a legal payment method in the country in 2021. On the other hand, Argentina has attempted to curb its crypto industry by introducing an anti-money laundering regulation, with many of its citizens switching to virtual currencies due to inflation.