TOPSHOT – Paraguayan presidential candidate for the Colorado Party, Santiago Peña (C), celebrates … [+] with his wife, Leticia Ocampos de Pea (R), and Paraguayan former President Horacio Cartes, after winning the presidential election in Asuncion on April 30, 2023. – Paraguayans went to the polls Sunday to pick a president they hope will tackle endemic corruption, rising crime and economic inequality, with the election potentially impacting the country’s future ties with Taiwan. (Photo by NORBERTO DUARTE / AFP) (Photo by NORBERTO DUARTE/AFP via Getty Images)

AFP via Getty Images

Paraguay is discussing to set stricter regulations around bitcoin mining in the country. Despite all the excitement that the country’s cheap electricity price drove among the bitcoin community during the last few years, the local government is now looking for ways to better control this activity. The proposal, introduced on April 3 by the senatorial chamber at the National Congress, aims to temporarily ban bitcoin mining in the country.

This proposed law also aims to prohibit the storage and trading of cryptocurrencies. One of the main arguments for its discussion is that the country has many illegal bitcoin mining operations. The ban will last at least six months, and regulators said the objective is to protect consumers from virtual assets’ risks. This bill must go through three other levels inside Congress before hitting the president’s desk.

“If it becomes law, it would directly affect the 50 legally operating mining companies that have contracts with the national energy administration, with contracts ranging from 6 MW to 100 MW”, Paraguayan bitcoin analyst Joaquin Morinigo explained to me in an interview. “It would also impact all cryptocurrency users in Paraguay by prohibiting the trading and storage of such assets,” he underscored. Morinigo was among the first X users to post comments about the potential new law.

Paraguay holds a unique position in the bitcoin mining industry, being one of the most attractive places in Latin America for bitcoin miners. It is one of the few countries worldwide with almost 100% hydroelectric generation capacity, operating two big binational hydroelectric dams with Brazil (Itaipu) and Argentina (Yacyreta). These green sources are not only interesting for bitcoin miners due to the cheap electricity, but also due to the growing importance of renewable energies for the investors in these kinds of companies.

According to data from the World Economic Forum, Paraguay is the country with the cleanest electric power production in the world, along with Albania, as the United Nations Development Programme reported. But if the new law passes, all this potential for bitcoin miners could be lost, and in fact, cryptocurrency users in all the country will be affected.

“I believe this proposal is a threat to the development of the ecosystem in Paraguay. This proposal is a direct violation of the individual freedoms of all citizens and residents of Paraguay because it bans an industry that benefits the country,” Morinigo argued.

It’s not the first time the legislative has tried to pass a law to regulate crypto-related activities in the country further. In 2022, the Paraguayan Congress discarded a similar proposal in December 2023. The Congress dropped that proposed law after failing to obtain the votes needed to reject the veto it received from the president Mario Abdo Benítez early that year, as Bitcoin.com reported. In that moment, the law was looking to regulate the activity as a commodity-based industry.

It’s unclear if this new proposal will have the same fate. But it shows that even under the administration of the new president, Santiago Peña, bitcoin mining and cryptocurrencies in general are still a concern for policymakers in the country.