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Paraguayan President Vetoes Crypto Regulation Proposal

 


Paraguay's President Mario Abdo Benítez on Monday vetoed a bill that would recognize cryptocurrency mining as an industrial activity. He argued that high electricity consumption in mining could hamper the development of a sustainable national industry.


The decree states that crypto mining is capital intensive and employs little labor. It therefore does not generate the same added value as other industrial activities. Globally, the cryptocurrency space is one of the biggest job creators. LinkedIn's Economic Graph shows that the number of job openings in the US in the crypto and blockchain sectors increased by 615 percent in 2021 compared to the previous year .


According to Senator Fernando Silva Facetti, who introduced the law, it should encourage crypto mining by using surplus electricity . But the Paraguayan government chose to ignore this activity in the country:

The Paraguayan Senate finally approved the proposal on July 14, recognizing crypto mining as an industrial activity. They set a 15 percent tax on related economic activities, but the decree sees that tax rate as an indirect incentive for the industry. It says:


"Since the tax rate for crypto miners' users is only slightly higher than the current industry tax rate, one would create an indirect industrial incentive for crypto mining."

According to the document, over the past 12 months, industrial investment in the country has increased by 220 percent to $319 million, while GDP has grown by more than 4 percent over the past five years. If this pace continues, the national industry could need all of the electricity produced and available in the country in order for it to remain sustainable.


"If Paraguay wants to intensify crypto mining today, it will be forced to import electricity in the next four years," the decree continues.


The bill, passed by the Senate, requires miners to apply for a license and obtain a permit for industrial power consumption. It also established the Ministry of Industry and Commerce as the primary law enforcement agency and the Anti-Money Laundering Secretariat to oversee crypto investment companies.


The low cost of electricity in Paraguay has attracted local and foreign companies. Mining infrastructures have been built there in the country since 2020. In December 2021, the cost of electricity was US$0.058/kWh for households and US$0.049/kWh for businesses, according to reports on global gasoline prices.

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