By
Josh O'Sullivan
April 30th, 2024
If lawmakers of Paraguay decide to proceed with Bitcoin mining ban, it will directly affect major players in the industry such as Marathon Digital Holdings which deployed 27 megawatts near the Itaipu hydroelectric power plant.
Lawmakers of the Latin American nation of Paraguay have turned sour towards Bitcoin mining claiming that illegal activities are stealing power while disrupting the nation’s electricity supply. Last week on April 4, the lawmakers introduced a new draft bill proposing to ban Bitcoin mining activities in the country.
If approved and passed, the Bitcoin mining ban in Paraguay would last for 180 days or till the time new laws come into the picture and Paraguay’s national power grid operator ensures a sufficient supply of electricity. However, as per the estimates, this ban could cost Paraguay’s economy an estimated $200 million every year. Thus, banning lawful mining operations could prove to be costly for the Latin American nation. Speaking on the developments, Hashlabs Mining’s co-founder and chief mining strategist Jaran Mellerud, said:
“Banning bitcoin mining could cost Paraguay more than $200 million a year, assuming the country has 500 MW of legal miners paying $0.05 per kWh in operating expenses.”
As per data from Worldometer, Paraguay is the 94th largest economy with a GDP size of $41.7 billion and a very small population of 6.8 million people. Thus, it would be interesting to see if Paraguay can afford to lose a market size as that of Bitcoin mining.
Mellerud argued that Bitcoin mining has provided a “significant, positive contribution to Paraguay’s trade balance”, so far. To operate in Paraguay, the Bitcoin mining firms first need to seek approval from the Paraguayan Ministry of Industry and Commerce.
If the lawmakers decided to approve the Bitcoin mining ban, it would impact top industry players like Marathon Digital Holdings, which started deploying 27 megawatts around the Itaipu hydroelectric power plant last November 2023.
Bitcoin Miners Flocking to Paraguay
A large number of Bitcoin miners have been setting up their facilities near the Itaipu dam which also caters to Paraguay’s local electricity needs while leveraging the excess amount of electricity. Paraguay exports a large amount of this excess electricity to Brazil at a lower price.
However, as per the lawmakers, there were 50 cases of interrupted power supply linked to crypto miners illegally tapping into the electricity sources. As per the country’s National Electricity Administration, crypto-mining operations led to damages and losses of up to $94,000. Also, the total annual losses in the Alto Paraná area – where the Itaipu power plant is based – could be up to $60 million.
“Illegal operations can be harmful to the grid if it draws too much electricity from low voltage lines,” Mellerud added. The dispute in Paraguay arises as Bitcoin miners gear up for the impending Bitcoin halving event slated for April 20. This event is anticipated to reduce miner rewards from 6.25 Bitcoin (BTC) (equivalent to $434,000) to 3.125 BTC ($217,000).