Paraguay’s president, Mario Abdo Bentez, has vetoed a bill that would have regulated Cryptocurrency. On Monday, the respective bill will go into effect with the goal of legalizing cryptocurrency mining within the state. He pointed out that mining’s high electricity use might hamper the development of a nationwide industry that could last for the long haul.
The decision argued that mining cryptocurrencies consumes a large amount of capital with low labor utilization, hence it does not produce any added value in comparison to other industrial activities. There is a widespread belief that the cryptocurrency industry is a major driver of economic growth.
Paraguay’s President vetoes cryptocurrency regulation bill
According to LinkedIn’s Economic Graph, the number of postings for blockchain and cryptocurrency-related employment in the United States increased by as much as 615 percent last year compared to the year before. According to the bill’s sponsor, Senator Fernando Silva Facetti, the law was meant to support cryptocurrency mining through the use of excess electricity, but authorities in Paraguay have increasingly ignored this practice.
In the end, on July 14th, the County Senate approved the relevant measure, proclaiming that crypto should be recognized as a business operation. They did this by imposing a 15% tax on all cryptocurrency-related commercial activity. The ruling, however, provides an indirect incentive that aids these operations.
It reveals that crypto mining rig owners will indirectly benefit if the rate imposed on them is only a small fraction higher than the current industrial rate. According to the text of the paper, over the past year, industrial investment within the jurisdiction increased by over 220%, reaching the sum of USD 319M.
Paraguay’s GDP benefits from crypto mining, but the country’s power grid can’t keep up.
In contrast, the country’s GDP increased by more than 4% over the course of the previous five years. If the trend continues, Paraguay’s manufacturing sector may need all of the electricity that is generated and stored in the country to survive.
The ruling continued by saying that in the next four years, imports of power will be necessary if the country wants to increase its crypto mining at the current rate. The legislation has now passed the Senate and requires the miners to apply for a license and seek permission to use energy at an industrial level.