A newly proposed bill in Paraguay could have dire economic consequences for the country, potentially resulting in an annual loss of over $200 million. The bill aims to ban crypto mining in the country, with lawmakers claiming that illegal mining operations are causing power theft and disrupting the electricity supply. If passed, the ban would last for 180 days or until new regulations are put in place and the national power grid operator can ensure sufficient energy supply.
However, such a ban on legal mining activities could prove costly for Paraguay. Jaran Mellerud, the co-founder and chief mining strategist of Hashlabs Mining, emphasized that markets of this size are uncommon in Paraguay, which has a relatively small population of 6.8 million people and the 94th largest gross domestic product in the world at $41.7 billion. According to Mellerud, Bitcoin mining has made a significant positive impact on Paraguay’s trade balance.
Currently, Bitcoin mining firms in Paraguay must register and obtain authorization from the Ministry of Industry and Commerce. If the bill is passed, it may have a significant impact on Marathon Digital Holdings, one of the industry’s largest players, which began deploying 27 megawatts around the Itaipu hydroelectric power plant in November last year. The Itaipu dam has become a popular location for miners due to its ability to supply all of Paraguay’s local electricity needs and provide a surplus for tapping into.
Lawmakers argue that there have been 50 instances of power supply interruptions linked to cryptocurrency mining since February, with each mining operation causing damages and losses of up to $94,900. The National Electricity Administration estimates that total annual losses in the Alto Paraná area, where the Itaipu power plant is located, could reach up to $60 million.
Mellerud acknowledged that illegal mining operations can be detrimental to the power grid if they draw excessive electricity from low voltage lines. A similar situation occurred in Kazakhstan a few years ago, resulting in the government cracking down on the industry and expelling illegal mining operators from the country.
Mellerud previously stated that Paraguay, along with Argentina, would attract an influx of miners from the United States seeking to expand or relocate to these energy-rich nations due to lower electricity costs.
The controversy in Paraguay coincides with the upcoming Bitcoin halving event, set to occur on April 20. This event will reduce miner rewards from 6.25 Bitcoin to 3.125 Bitcoin and has garnered attention from industry insiders and enthusiasts alike.