Paraguay Vetoes Bill to Regulate Crypto Mining Due To High Energy Consumption
2022.08.31 19:38
Paraguay Vetoes Bill to Regulate Crypto Mining Due To High Energy Consumption
- The presidential decree rejects the mining of Bitcoin (BTC) and other cryptocurrencies, given that it is not an industrial activity, generates little employment, and consumes a lot of electricity.
- The bill, which was approved by the Paraguayan Senate in July and sought to also regulate cryptocurrency trading, establishes that crypto mining would use surplus electricity.
The president of Paraguay, Mario Abdo Benítez, vetoed the bill approved by the senate in mid-July to regulate and recognize the mining and commercialization of cryptocurrencies as an industrial activity.
The decree issued on Monday by the presidency of the republic of the South American country alleges that crypto mining involves high energy consumption, which could become an obstacle to industrial expansion.
The bill that regulates the mining, commercialization, intermediation, exchange, transfer, custody, and administration of crypto assets, sparked a strong debate in the Senate before its approval.
The main reason for vetoing the Paraguayan cryptocurrency bill was the high consumption of electrical energy, due to the intensive use of capital and the low utilization of labor, generated by the mining of Bitcoin (BTC) and other cryptocurrencies.
The government claims that crypto mining cannot be considered as an industrial activity but as an “electro-intensive consumption” operation. “It does not generate added value, but rather constitutes the provision of a transaction registration and validation service of a distributed blockchain system,” he adds.
Senator Fernando Silva Facetti, who sponsored the bill, said that the purpose of the law was to promote cryptocurrency mining using the surplus electricity the country produces, but that the government chose to ignore this economic activity.
For Facetti, the rejection of the bill that regulates the mining and commercialization of crypto assets ignores the existence of this activity “which today works in the shadow of regulations,” Facetti wrote on his Twitter (NYSE:TWTR) account.
The Government Rationale
The proposal approved by the Paraguayan Senate on July 14, recognizes crypto mining as an industrial activity. In addition, it sought to establish that the rate for this activity would not exceed 15% in relation to the current industrial rate to encourage its growth.
According to the presidential decree, the rate applicable to cryptocurrency miners is being subordinated to only a small percentage above the current industrial rate, which represents “an indirect industrial incentive for crypto mining,” the presidential decree states.
The document justifies the decision arguing that the country’s industrial investment has grown 220% in the last 12 months with an income of 319 million dollars. Likewise, it maintains that economic activity increased by 4% during the last five years, so it is expected that the demand for electrical energy will also increase in the future.
According to the decree of President Benítez, “if Paraguay wants to intensify crypto mining today, in the next four years it will be forced to import electricity.”
1# Hoy recibimos de @PresidenciaPy el VETO TOTAL a Ley “Que regula la minería, comercialización, intermediación, intercambio, transferencia, custodia y administración de #CRIPTOACTIVOS” ignorando existencia de esta actividad que hoy funciona en la sombra normativa. (abro hilo)
— FernandoSilvaFacetti (@FSilvaFacetti) August 30, 2022
On the Flipside
- According to the bill, crypto miners had to previously apply for a license and have government authorization to operate their equipment and consume industrial energy.
Why You Should Care
- Paraguay is one of the Latin American countries where Bitcoin mining has grown the most in the last two years. The low costs of electricity have allowed national and foreign miners to set up their farms in the country.
According to Facetti, by vetoing the cryptocurrency bill, the Paraguayan government is denying the possibility of improving fiscal and financial transparency, which in his opinion “shows the lack of vision of the State.”
In the following articles, you can read more news related to cryptocurrency mining and trading in Paraguay:
Not Just Another Bukele: Paraguay to Regulate Crypto Mining
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