Key Takeaways
- Paraguayan lawmakers are evaluating a draft bill to pause crypto mining operations to address energy supply issues;
- The country's reliance on hydroelectric power for mining has positioned it as a leader in sustainable Bitcoin mining in Latin America, but has also attracted illegal mining activities;
- Passing the bill could lead to significant financial losses for Paraguay.
Paraguayan legislators are considering a draft bill that would suspend crypto mining operations for six months or until the national electricity grid can sufficiently meet energy demands.
This proposed ban seeks to address illegal mining activities, causing disruptions in the country's electrical supply system.
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Paraguay has emerged as a key player in Latin America for Bitcoin (BTC) mining, primarily because of its nearly 100% reliance on hydroelectric power from two major dams, Itaipu and Yacyreta. This renewable energy source not only offers low-cost electricity but also attracts miners keen on sustainable practices.
However, the country's National Electricity Administration has reported issues with electricity distribution, tracing them to crypto miners illegally tapping into the power grid.
Since February, there have been 50 reported cases of such unauthorized access, leading to estimated annual damages of as much as $60 million in the Alto Paraná region, the location of the Itaipu dam.
Yet, the introduction of this bill still raises questions about its efficacy as a solution.
Jaran Mellerud, co-founder and chief mining strategist at Hashlabs Mining, has estimated that outlawing Bitcoin mining could lead to financial losses exceeding $200 million annually for Paraguay. This estimation considers the 500 megawatts of legal mining operations in the country, paying $0.05 per kilowatt-hour in operating expenses.
Nonetheless, the bill's proposal highlights the need for a balanced approach to regulating an industry that intertwines with the nation's energy resources and economy.
Paraguay's situation mirrors that of Kazakhstan, where the government was forced to take strict measures against illegal crypto mining operations due to electricity shortage concerns.
