As the country’s mining industry continues to grow as a result of low energy costs, the bill was approved by the nation’s Senate in July.
On Monday, Mario Abdo Bentez, the president of Paraguay, vetoed a bill that sought to classify cryptocurrency mining as an industrial endeavor. He reasoned that the development of a nationally sustainable industry might be hampered by mining’s high electricity consumption.
According to the decree, crypto mining does not produce added value on par with other industrial activities because it requires a lot of capital and little manpower. One of the main sources of employment creation worldwide is cryptocurrencies. According to LinkedIn’s Economic Graph, the number of crypto and blockchain jobs listed in the US increased by 615% in 2021 compared to 2020.
The law was intended to encourage crypto mining by making use of excess electricity, according to the bill’s sponsor, Senator Fernando Silva Facetti, but the Paraguayan government decided to ignore the practice there:
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 July 14, the proposal was finally approved by the Paraguayan Senate, recognizing cryptocurrency mining as an industrial activity. They enacted a 15% tax on the associated economic activities, but the decree views the brackets as a tacit incentive for the sector. It reads:
“By subordinating the rate applicable to the users of crypto miners to just a small percentage above the current industrial rate, an indirect industrial incentive would be offered to crypto mining.”
The document states that while the GDP increased more than 4% over the previous five years, industrial investment in the nation increased by 220% in the past year to $319 million. The national industry might need all the energy produced and available in the nation if this rate is allowed to continue in order to maintain sustainability.
The decree stated that if Paraguay wanted to increase cryptocurrency mining “today, it would have to import electricity in the next four years.”
According to the Senate-approved legislation, miners must submit an application for a license and a request for permission to use industrial energy. Additionally, it established the Secretariat for the Prevention of Money or Asset Laundering to oversee cryptocurrency investment firms and the Ministry of Industry and Commerce as the primary law enforcement agency.
Since 2020, local and foreign businesses have been installing mining infrastructure in Paraguay due to the country’s low energy costs. According to reports on global gasoline prices, household electricity costs in December 2021 were $0.058 per kWh and business electricity costs were $0.049 per kWh.