Paraguay Faces Potential $200 Million Loss Amid Proposed Crypto Mining Ban

Lawmakers in Paraguay are considering a bill that could result in a significant economic loss for the country. The proposed legislation, introduced on April 4, seeks to ban cryptocurrency mining due to concerns over illegal operations draining power and disrupting the national electricity supply.

If passed, the ban would be temporary, lasting 180 days or until new regulations are in place and the national power grid can guarantee adequate energy supply. However, the ban could have serious financial implications for Paraguay, potentially costing the economy over $200 million annually.

According to Jaran Mellerud, co-founder and chief mining strategist at Hashlabs Mining, the ban would impact legal miners who pay around $0.05 per kWh in operating expenses. This revenue loss would be significant for Paraguay, considering its relatively small economy and population.

Bitcoin mining has been a lucrative industry for Paraguay, contributing positively to its trade balance. However, the proposed ban could disrupt this trend and impact major players in the industry, such as Marathon Digital Holdings, which operates around the Itaipu hydroelectric power plant.

The Itaipu dam has been a favored location for miners due to its surplus electricity, which has historically been exported to Brazil. However, recent months have seen an influx of miners tapping into this excess electricity at slightly higher prices.

Lawmakers cite 50 cases of power supply interruptions linked to illegal mining operations since February, prompting concerns about the strain on the grid and potential damages. Similar issues in Kazakhstan led to government crackdowns on illegal mining.

Despite the potential economic consequences, Paraguay's stance on crypto mining remains uncertain as it prepares for the upcoming Bitcoin halving event, expected to occur on April 20. This event will reduce miner rewards, adding further complexity to the country's mining landscape.