In Paraguay, a proposed bill aiming to ban cryptocurrency mining is raising concerns about significant economic repercussions.
Introduced on April 4, the legislation cites issues with illegal mining operations that reportedly compromise the national electricity supply, prompting a potential prohibition period of 180 days or until the adoption of new regulations.
This move, however, might have costly implications for Paraguay, as highlighted by Jaran Mellerud, co-founder of Hashlabs Mining.
In a recent discussion with Cointelegraph, Mellerud estimated that such a ban could lead to over $200 million in annual losses for Paraguay, considering the presence of 500 megawatts of legal mining operations incurring $0.05 per kilowatt-hour of operating expenses.
Paraguay’s status as a relatively small market, with a population of 6.8 million and the world’s 94th-largest GDP at $41.7 billion, as per 2022 data from Worldometer, makes the potential financial impact more significant.
Bitcoin mining has been a beneficial economic activity for the nation, contributing positively to its trade balance.
The current regulatory framework requires Bitcoin mining companies to register with the Paraguayan Ministry of Industry and Commerce.
The draft bill, if passed, could affect major industry participants like Marathon Digital Holdings, which began operations near the Itaipu hydroelectric plant last November.
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This site is notably advantageous for miners due to its surplus electricity, previously sold to Brazil at low rates.
However, Bitcoin miners have recently been purchasing this excess power at slightly higher prices, Mellerud noted.
Despite the advantages, the government has registered 50 instances of power disruptions tied to illegal mining activities since February, with estimated damages and losses amounting to $94,900 per case, totaling up to $60 million annually in the Alto Paraná area alone.
Acknowledging the potential for illegal mining to overburden the grid, Mellerud referenced Kazakhstan’s past issues with unauthorized miners as a cautionary tale.
He also mentioned the interest of U.S.-based miners in relocating to Paraguay and Argentina for cheaper electricity costs.
This debate emerges as the Bitcoin community anticipates the “halving” event on April 20, which will reduce mining rewards, further complicating the economic dynamics for miners in Paraguay.
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