Key Points
- Paraguayan lawmakers propose a ban on Bitcoin mining due to concerns over power disruption.
- The proposed ban could cost the country’s economy an estimated $200 million annually.
Paraguay’s lawmakers have proposed a ban on Bitcoin mining activities, citing illegal activities that are disrupting the nation’s power supply. The draft bill was introduced last week.
If the bill is passed, the ban would last for 180 days or until new laws are in place and the national power grid operator can ensure a sufficient electricity supply. However, it is estimated that this ban could cost the country’s economy about $200 million per year.
The Potential Impact of the Ban
The potential cost of the ban is significant given that Paraguay is the 94th largest economy with a GDP of $41.7 billion and a population of 6.8 million. Jaran Mellerud, co-founder and chief mining strategist of Hashlabs Mining, stated that the ban could cost Paraguay more than $200 million a year, assuming that the country has 500 MW of legal miners paying $0.05 per kWh in operating expenses.
Mellerud also argued that Bitcoin mining has made a significant positive contribution to Paraguay’s trade balance. To operate in Paraguay, Bitcoin mining firms first need approval from the Paraguayan Ministry of Industry and Commerce. If the ban is approved, it could impact major industry players like Marathon Digital Holdings.
Bitcoin Mining in Paraguay
Many Bitcoin miners have set up their facilities near the Itaipu dam, which also meets Paraguay’s local electricity needs while using the excess electricity. Paraguay exports a large amount of this excess electricity to Brazil at a lower price.
However, lawmakers claim there were 50 cases of power supply interruption linked to crypto miners illegally tapping into electricity sources. The National Electricity Administration reported that crypto mining operations led to damages and losses of up to $94,000, with total annual losses in the Alto Paraná area potentially reaching $60 million.
Mellerud added that illegal operations could harm the grid if they draw too much electricity from low voltage lines. The dispute arises as Bitcoin miners prepare for the upcoming Bitcoin halving event on April 20, which is expected to reduce miner rewards from 6.25 Bitcoin (BTC) to 3.125 BTC.