Paraguay Faces Potential $200 Million Loss from Proposed Mining Ban

Paraguay’s economy could forfeit over $200 million in annual revenue if a proposed bill to ban mining is enacted. This was stated by Hashlabs Mining co-founder Jaran Mellerud in an interview with Cointelegraph.

In April, a group of senators introduced a document to Congress proposing a 180-day moratorium on cryptocurrency mining activities and related operations. The ban could be extended until comprehensive digital asset regulations are established and until the national energy system operator ANDE can ensure stable infrastructure operation.

Politicians claim that illegal mining farms steal electricity and disrupt public supply.

However, Mellerud believes that restrictions on registered cryptocurrency mining enterprises could prove costly for the country.

“A bitcoin mining ban could cost Paraguay more than $200 million annually, assuming the country has 500 MW of legal miners paying $0.05 per kWh in operating expenses,” he stated.

The GDP per capita in the country stands at $5843, ranking 104th globally and significantly lower than neighboring Brazil ($10,413) or Argentina ($13,297). The total GDP of the small Latin American nation (population 6.8 million) barely exceeds $44 billion.

According to Mellerud, the mining industry currently makes a “significant, positive contribution to Paraguay’s trade balance.”

The Itaipu Dam area has become a popular site for establishing cryptocurrency mining enterprises. The world’s second-largest hydroelectric power station fully meets the country’s needs. Historically, surplus electricity has been exported to Brazil at low prices. Miners purchase it at higher rates, the expert noted.

However, legislators claim that as of February, there were 50 registered cases of power outages caused by cryptocurrency mining. ANDE estimates that each illegal mining farm causes an average monthly damage of ~$95,000, with annual losses potentially reaching ~$60 million.

“Illegal operations can harm the power system if they draw too much electricity from low-voltage lines,” Mellerud acknowledged.

Back in 2023, experts from Hashrate Index, assessing the development and prospects of bitcoin mining in Paraguay, concluded that the country is becoming an important global hub for the industry.