On July 19, Paraguay’s national electricity provider, Administración Nacional de Electricidad (ANDE), confirmed the continuation of a planned electricity price increase for legal cryptocurrency miners set to commence on August 1. This decision follows a significant 54% increase in fees in 2022, coinciding with the initiation of new five-year contracts between miners and ANDE.
Impact on the Crypto Mining Sector
According to Jimmy Kim, the spokesperson for the Chamber of Digital Asset Mining (Capamad), which represents legal Paraguayan Bitcoin and altcoin miners, these hikes could render legal crypto mining operations in Paraguay unsustainable. Kim estimates that up to 70% of legitimate mining businesses might cease operations in August due to these elevated costs.
Capamad argues that the increased fees will not only force miners out of business but will also lead to extensive job losses, both direct and indirect. Kim highlighted that the decision jeopardizes over $1.5 billion in anticipated technology and infrastructure investments. He emphasized the severity of the situation, stating, “This is not just about a few miners; this is about the livelihoods of thousands and the future economic direction of Paraguay.”
Government and ANDE’s Stance
On the same day, ANDE discussed legislative efforts to enhance the integrity of the national electrical system, citing disruptions caused by crypto mining operations. The government also announced stricter penalties for the illicit theft of electricity, a measure aimed primarily at illegal mining activities.
While Capamad recognizes the necessity to address illegal mining operations, it urges the government and ANDE to reconsider the price hikes for legal entities. “Our members face tough choices on sustaining operations. An urgent reevaluation of this increase is crucial to protect what has become a vital revenue source for Paraguay’s economy,” Kim stated.
Contribution to the National Economy
Legal mining companies, numbering over 50, are reportedly among the largest contributors to Paraguay’s economy in terms of foreign direct investment (FDI), with an investment tally exceeding $700 million. “This level of investment is unprecedented in Paraguay’s history and signifies the potential of the mining sector to be a cornerstone of economic growth,” added Kim.
The unfolding situation presents a critical juncture for Paraguay’s burgeoning crypto mining industry and its broader economic landscape. The outcome of this debate could set a precedent for how emerging economies balance regulatory and economic interests in the fast-evolving cryptocurrency sector.
This pivotal moment in Paraguay’s crypto industry calls for a balanced approach to regulation and economic development, with potential long-term impacts on the country’s technological and economic landscape. The decision by ANDE and the subsequent reactions from industry stakeholders underscore the complex interplay between innovation, regulation, and economic stability in the era of digital currencies.
Featured image credit: vwalakte via Freepik
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