Mario Abdo Benítez, the president of Paraguay, has vetoed a bill that sought to legalize crypto trading and recognize crypto mining as an industrial activity.
This move comes after recommendations were made against the bill by the National Electricity Administration (ANDE), Ministry of Industry and Trade (MIC), and the Paraguayan central bank.
All is not over yet as the bill will be sent back to the National Congress now, where if both chambers approve it with the majority, it can still be enacted.
The bill was approved in the Senate a few months back, establishing that miners would have to apply for a license and request authorization for industrial energy consumption.
This is not an outlier requirement. In fact, it is a pretty standard practice among major crypto mining centers. For instance, Texas has made it mandatory for crypto miners to get permits before plugging into the electric grid.
The proposed law also called for establishing the Ministry of Industry and Commerce as the primary law enforcement authority and the Secretariat for the Prevention of Money or Asset Laundering to supervise mining investments carried out by companies. Meanwhile, the National Securities Commission would oversee how companies would manage the digital assets produced by mining.
While the Senate-approved bill cites low-energy costs boosting mining activities in the South American country, the President reasoned this week that crypto mining’s high electricity consumption could hinder the expansion of a sustainable national industry.
Considering how 1449 KWh energy is required to mine one Bitcoin, the President’s nod of disapproval seems on point, especially for a country that plans to prioritize sustainable development of the national industrial activity.
We also came across an interesting chart that puts Bitcoin’s annual global energy consumption into perspective by pitting it against the annual energy consumption of a few countries and multinational corporations:
Besides, cryptocurrency mining utilizes intensive capital with low manpower usage. As such, it would not generate added value on par with other industrial activities. Prioritizing any industrial activity that doesn’t lead to considerable employment opportunities for citizens isn’t something that will amuse the President, especially when Paraguay is among the countries with the highest unemployment rate.
When the Senate approved the bill in July after the Chamber of Deputies did the same a couple of months before, the Paraguayan Senate also established a 15% tax on economic activities related to crypto mining.
The decree, however, saw it as an “indirect industrial incentive” to crypto because the rate applicable to crypto miners is just a small percentage above the current industrial rate.
This is a deal-breaker in the President’s eyes, especially when the industrial investment in the country went up by 220% to $319 million.
Besides, the President believes incentivizing the crypto mining industry on a large scale would wreak havoc on the country’s growing industrial activity by turning the country into a net electricity importer within the next four years.
All in all, the Paraguayan President vetoed the proposed bill over concerns that legalizing crypto mining will hamper the country’s industrial activity through excessive electricity consumption. But all is not over yet, as the ball is now in the National Congress's court. If both chambers approve the proposed bill, it can still become law. So, keep an eye on our social media channels to get regular updates on how the chapter on crypto regulations unfolds in Paraguay.
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