Paraguay has just passed a law aimed at building a Bitcoin mining industry. The legislation proposed by MP Carlitos Rejala and Senator Fernando Silva is welcome even if it does not go as far as that of El Salvador.
A 100% renewable energy BTC mining industry
Paraguay is the second country in America to provide a legal framework for bitcoin and in particular the BTC mining industry. This is what we sensed a few weeks ago when MP Carlitos Rejala plugged his laser eyes before launching a tweet with the hashtag #BTC to announce an “important project “:
“It’s a safe bet that Paraguay will be active in the field of BTC mining. In 2018, the country’s two large hydroelectric dams produced three times its electricity needs. Energy is therefore exported to its neighbors and brings in more than $ 2 billion per year, or 1/4 of its total exports and 7% of its GDP. The two dams located on the Rio Paraná are held 50/50 with the border countries: the Itaipu dam on the Brazilian border, and that of Yacyretá on the Argentinian border.“
In other words, it is around 30 TWh/year of renewable energy that Paraguay could theoretically redirect to Bitcoin mining. That is to say a little less than half of the energy power currently required for the entire BTC network.
Paraguay’s timing is perfect given that the mining machines that were in China (half of the world’s fleet) are now looking for a base!
“Today, we are proud to present this project which will offer considerable economic, financial and fiscal benefits for our population through the consumption and use of our renewable energy, mainly from our hydroelectric plants of Itaipú and Yacireta. The country has huge surpluses that we will use for the benefit of the Paraguayan state,” said Rejala during the presentation of the project.
A law that upsets the maximalists
In June, the government of Nayib Bukele made El Salvador the first country in the world to make bitcoin a currency in its own right. This is not the path chosen by Paraguay which enjoys its own currency unlike El Salvador which used the dollar until now. Ascension simply put in place a clear legal framework to attract BTC minors.
MP Silva Facetti made it clear: “We are not talking about a project similar to that of El Salvador (where bitcoin) has become a bargaining chip. A crypto-asset is a commodity and an end product for us”.
The second article of the law states:
“This law applies to any natural or legal person domiciled in the Republic of Paraguay who is dedicated to the intermediation, marketing, exchange, transfer or storage of cryptoactive virtual assets.“
The third article defines a “cryptoasset” by describing it as an “asset existing in digital form that can be owned by anyone”. It is a “property that can be bought and sold”.
Finally, the fourth article announces that minors will have to obtain a license from the Ministry of Industry and Commerce. “Any natural or legal person having a mining activity without authorization will be liable to sanction“, we can read in this law, half of the pages of which concerns the sanctions regime.
The heart of Latin America has therefore introduced a legal framework similar to that of Iran where minors also need a license on pain of confiscation of the material. The aim of the maneuver is of course to propose tariffs for electricity higher than normal in order to fill the public coffers .
Regrets but everything in its time
It is unfortunate that the law does not exempt minors whose computing power is below a certain threshold. Given the ideal of freedom that bitcoin represents, it is not acceptable that the only path is industrial centralization. Anyone can plant fruit trees in their garden and enjoy ownership of their fruits. The same should be true for BTC mining.
The fact that bitcoin has not been declared legal tender will also upset many. This lack of ambition is perhaps linked to the recent visit of the gray eminence Victoria Nuland…
“Panama and Paraguay – two countries which count (have) been following in the footsteps of El Salvador from July – received at the end of June the visit of Victoria Nuland, Secretary of State for Political Affairs of the State Department American. The same one who had declared in 2014 to her ambassador in Kiev “Fuck the EU” at the time of the coup d’état orchestrated in Ukraine by the United States… The secretary was accompanied by General Uribe as well as the ‘Assistant to US Defense Secretary Daniel Erikson…”
We then said that we would “not be surprised if Paraguay and Panama postpone the adoption of bitcoin as currency ” following this intriguing diplomatic visit. It remains to be seen what Panama will do, which, like El Salvador, also uses the US dollar as its sole currency. The absence of taxation on capital gains would attract billions of capital in this country which is already establishing itself as the largest financial center in Central America.
The maximalists will be hungry for more, but Paraguay has perhaps played its cards in the most careful way by adopting the strategy advocated by Michael Saylor . The most important thing is that bitcoin is legalized. The fantastic liquidity of bitcoin and the collapse of fiat currencies under the weight of their debt will do the rest in due course.