FameEX Hot Topics | Paraguay Considers Temporary Ban on Crypto Mining Due to Illegal Operations Straining the Power Grid

In response to the growing issue of illegal cryptocurrency mining operations siphoning electricity, Paraguayan legislators have put forward a bill aiming for a temporary cessation of crypto mining and its associated functions within the country. Introduced on April 4, this draft legislation seeks to halt not only the establishment of new mining farms but also the creation, maintenance, storage, and sale of cryptocurrencies, with a particular focus on regulating crypto staking and wallet services.

The proposed suspension is set for a duration of 180 days—or until comprehensive legislation is formulated. This measure awaits the assurance from the National Electricity Administration (ANDE) that the national grid can accommodate the power demands of legitimate crypto mining activities without compromising the electricity supply to other consumers in Paraguay.

This legislative move comes amid a notable influx of crypto mining operations to Paraguay, drawn by the abundance of hydroelectric power, particularly in the Alto Paraná region. This area, benefiting from the Itaipu Dam—one of the globe's largest hydroelectric projects—has become a preferred locale for miners due to the cheap and plentiful energy supply. However, since February, this influx has led to 50 instances where the power supply was disrupted due to unauthorized connections to the electrical grid.

ANDE has assessed that each illegal mining setup could inflict financial damages estimated at approximately $94,900, with potential annual losses in the Alto Paraná region alone projected to reach $60 million. The draft legislation underscores the necessity for regulatory oversight to manage the sector more effectively, pointing out the current legal gaps that pose risks, including inadequate consumer protection, and the potential for money laundering and tax evasion through unregulated digital assets.

This push for regulation arrives after a near-successful attempt in 2022 to establish a legal and tax framework for the crypto and mining industries in Paraguay. That initiative, however, was ultimately vetoed by then-President Mario Abdo Benítez, who cited concerns about the extensive energy consumption associated with mining operations potentially hindering the advancement of a sustainable energy framework in the country. The proposed temporary ban reflects a concerted effort to address immediate issues posed by unauthorized mining while setting the stage for a more regulated and sustainable approach to the burgeoning industry, aiming to preserve the integrity of Paraguay's electrical infrastructure and its economic interests in the face of rapid technological advancements.

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