Paraguay is a step closer to regulating digital currency activities within its border. While at first glance, one might think it is detrimental to the cryptocurrency industry, looking between the lines shows it is more of an advantage to the cryptocurrency industry, as the country has outlined several means to have sustainable crypto inclusiveness. 

As with most South American countries, inflation has plagued Paraguay over the years, and this has caused Paraguay’s currency, the Guaraní, to tank greatly. The Paraguayan Senate has approved a crypto bill that was originally introduced in July 2021 in an effort to restore the country’s prestige.

Some notable inclusion in the bill includes: 

1. Definition of cryptocurrency and what assets can be classified as virtual assets
2. The provision of a licence to crypto miners and make use of the excess electricity generated by the country to earn more in taxes.
3. Clarification on who can be a crypto miner, a virtual asset service provider (crypto exchange), and a token provider. 
4. A chance for the Paraguay’s Ministry of Industry and Commerce to get help, if need be, outside the country’s borders to implement the law

The law has already passed the Paraguayan Senate, a place notable for its strict analysis of everything that comes by, and it has been forwarded to the Deputy Chamber to be further analyzed. 

Perhaps, the most important part of this bill is that it clearly classifies Bitcoin mining as a legal activity. The decision is logical given that the majority of the country’s source for electricity supply is through renewable source, and they only use 26% of it, with the rest flowing to neighbouring Latin-American countries.

Paraguay might just want to put structures in place to avoid the happenings in Kazakhstan and Iran. The plan is to provide a legislative framework to incentivize digital money activities in the country.

What is happening in Iran and Kazakhstan?

Following China’s ultimate ban on crypto mining and mining activities, Bitcoin miners migrated to the United States, Kazakhstan, and Russia. 

Kazakhstan is recognised for its cheap electricity costs, which is why the miners chose the country for their business. While the migration brought many legitimate miners in, boosting the government’s revenue from them, it also brought in a large number of illicit miners, putting strain on the energy infrastructure. 

The whole situation escalated quickly, putting the government in a dilemma. Should they accept the miners and continue to experience outages? (not a good choice, since the miners would ultimately leave the country without a good supply of electricity). Should they prohibit crypto mining activities and forfeit the over $1.2 billion they get from crypto miners in taxes? 

Well, Kazakhstan did not go for any of these options. Rather, they proposed building a nuclear plant to cover up the electricity deficit. For a country that has a shady history with nuclear energy, it was a daring move. Recent crypto news coming from Kazakhstan suggested that the country took the unconventional move to increase electricity costs, which resulted in a revolt and a series of protests. 

In contrast, Iran had to ban crypto mining activities twice in the space of a year. For a country that supplies around 5% of the world’s Bitcoin hashrate, it was also left at a crossroads given the sudden influx of miners following China’s crypto mining ban. 

Iran has taken solace in generating millions of dollars through mining to offset the consequences of several US sanctions, but was forced to suspend crypto mining entirely when the power grid was attacked. 

Illegal crypto-mining accounts for 600 megawatts of the country’s electricity, and a piece of crypto news from 2021 claimed the government arrested 7,000 illegal miners, the largest to date. After looking at means to reduce electricity, the country banned cryptocurrency mining activities, regulated electricity uses in offices, and put up structures to reduce street light energy consumption. 

The country blamed the surge and power crises on China’s decision to expel miners, and the electricity distribution will continue in this pattern until March 2022. 

Paraguay and Bitcoin

The choice made by Paraguay is understandable, and they should be commended for it. According to Rejela, an entrepreneur-turned-politician in Paraguay,  the decision was finally reached after many months of tiring negotiations and collaborations with both local and international crypto specialists.

Paraguayan Congressperson, Carlos Rejala launched the bill together with another prominent name in the senate, Fernando Silva Facetti, to the effect of crypto commitment in July 2021.  We can only wait for the chamber of deputy’s response in 2022 to the elaborate Paraguay’s move to accepting digital currency and the accompanying  policy. If the bill passes, Paraguay will join the list of countries that are pushing crypto adoption. 

The US is leading this move in different ways. Texas is making itself a friendly spot for virtual currency mining. The push for the first Bitcoin city has been raging strong between different cities, and there are even Bitcoin ATMs set up in Miami airport. 

Furthermore, El Salvador has come in touching distance as regards digital money adoption. The president is a vocal crypto bull, and the country is planning a Bitcoin fund to help improve infrastructural development in the country. Tonga is following the footsteps of El Salvador to make Bitcoin a legal tender, and a barrage of countries are all coming with different approaches to foster crypto adoption. 

Some countries are even rooting for their own indigenous exchanges to grow and compete with the likes of Binance, Coinbase, and https://redot.com/ . While each of these countries takes a unique approach, the result remains the same: crypto adoption. 

The Paraguay industry might not have gotten experiential knowledge of Bitcoin, but from observing other countries, they can leverage their strengths while avoiding the loopholes. It is uncertain Paraguay would look into the local crypto exchanges available, but if they do, the setup will be such that it can compete with some of the best crypto exchanges in the world.