A Paraguay crypto bill focused on taxation and crypto mining has been tabled by lawmakers. The bill would have established electricity cost caps for mining.
Crypto miners will no longer find Paraguay a haven for mining after lawmakers backtracked on a crypto law. The country was due to pass crypto regulations but decided against it on Dec. 5 after a lengthy period of deliberation.
The bill would have created both a tax scheme and a regulatory framework for the asset class.
The most significant impact of the backtrack is the fact that miners will not be able to tap into the country’s cheap energy. Paraguay’s President Mario Abdo Benitez had previously said that bitcoin used too much energy and that the asset was not economically beneficial enough. The bill was originally passed earlier this year.
Paraguay’s lower house of parliament, the Chamber of Deputies, archived the bill on Monday, despite having rejected the president’s veto. The bill managed to obtain 36 votes, five short of the 41 needed for it to pass.
The bill would have taxed the industry and offered a cap on electricity costs for miners. As such, it would have been very appealing to bitcoin miners.
Paraguay is still a hotbed for bitcoin mining because of its cheap energy and hydroelectric infrastructure. For example, Bitfarms has a presence in the country, having established a five-year lease deal to obtain 10MW of power.
Another reason for the bill’s rejection is that lawmakers don’t believe the infrastructure can handle the load. Local grid operator Ande is also resistant to the bill and has asked the government to increase miners’ tariffs by 60%.
Cheap Energy Important to Miners
Cheap energy has always been attractive to bitcoin miners, whose energy requirements have attracted attention worldwide. Countries like China, where energy is also cheap, have banned bitcoin mining, leading to miners seeking alternatives.
The Middle East is also a popular region under consideration by miners. Several countries in the area have cheap electricity. For example, the cost of 1 kWh in Kuwait is only 3 cents. However, countries in the region are also working on their own regulations, which will impact the mining industry.
Paraguayan Regulation To Be Closely Watched
When Paraguay announced that it would implement incentives for bitcoin mining, miners rejoiced. The country is the fourth-largest net exporter of electricity. The bill described crypto mining as “an industrial and innovative activity.”
Some lawmakers and government agencies in Paraguay have disapproved of the bill, believing crypto to be of high risk. Likely, there will not be any crypto regulations without much deliberation.
South America is a popular region for the crypto industry. Argentina, Uruguay, and Panama are also working on regulations for the crypto asset class.