Mario Abdo Benitez (President of Paraguay) vetoed Monday’s bill to allow cryptocurrency mining to be recognized as an industrial activity. He argued that mining’s high electricity use could prevent the growth of a sustainable national sector.
According to the decree, crypto mining requires intensive capital and low manpower usage. It therefore does not add value comparable with other industrial activities. Cryptocurrency is a major job creator around the globe. According to LinkedIn’s Economic Graph, crypto and blockchain jobs listings increased by 615 percent in 2021 compared with 2020 in the United States.
According to Senator Fernando Silva Facetti (the bill’s sponsor), the law was intended to encourage crypto mining by the use of surplus electricity. However, the Paraguayan government decided to ignore this activity.
1# Hoy recibimos de @PresidenciaPy el VETO TOTAL a Ley “Que regula la mineria, comercializacion, intermediacion, intercambio, transferencia, custodia y administracion de #CRIPTOACTIVOS” ignorando existencia de esta actividad que hoy funciona en la sombra normativa. (abro hilo)
— FernandoSilvaFacetti (@FSilvaFacetti) August 30, 2022
The proposal was approved by the Paraguayan Senate on July 14th. It recognized crypto mining as an industry activity. The decree imposes a 15% tax on the related economic activities. However, the decree considers brackets an indirect incentive for the industry. It states:
“By reducing the rate that crypto miners pay to a fraction of the industrial rate, an indirect incentive to crypto mining could be provided.”
According to the document the country’s industrial investment increased by 220% to $319million USD in the last 12 months. The GDP grew more than 4% over the past five years. This rate could continue, and the national industry may need all the energy available to the country to keep its sustainability.
The decree stated that Paraguay will have to import electricity if it wants to increase crypto mining.
Senate approved the bill. It stipulates that miners will need to apply for a license, and request authorization to consume industrial energy. The bill also created the Ministry of Industry and Commerce to be the principal law enforcement agency and the Secretariat for the Prevention of Money or Asset Laundering for supervision of crypto investment companies.
Paraguay’s low energy costs have prompted foreign and local companies to build mining infrastructure since 2020. According to global petrol price reports, December 2021 saw household electricity costs at $0.058/kWh and business electricity costs at $0.049/kWh.