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Crypto mining in Paraguay is set for a massive growth, with over 400 MW in projects awaiting for approval. Felix Sosa, the president of the National Power Administration of Paraguay (ANDE), has downplayed reports suggesting that a mass exit of cryptocurrency mining companies could be on the horizon.
Felix Sosa Confirms No Mining Firms Have Cancelled Contracts
Felix Sosa, head of ANDE, dismissed the claims that recent power hikes implemented by the institution have prompted an exodus of cryptocurrency mining firms. According to local news sources, Sosa indicated that no cryptocurrency mining companies have rescinded their contracts with ANDE. He emphasized that ANDE had recently signed a new 6MW contract with an unidentified cryptocurrency mining firm set to operate in Coronel Belbrano, Itapua, bringing one more player into the legal framework of crypto mining in Paraguay.
As it stands, 72 cryptocurrency companies are operational in Paraguay, and there are pending approval to commence their activities. Based on Sosa’s data, approximately 400 MW in projects wait for government authorization to kickstart operations in crypto mining in Paraguay.
When discussing the approval process, Sosa explained, “A technical evaluation is carried out to verify where to install, where ANDE has power availability for the installation of this type of load.” Sosa’s comments align with statements made by Paraguayan President Santiago Pena, who previously remarked that the recently implemented 15% power rate hike for the cryptocurrency mining industry would not deter companies from establishing their presence in Paraguay.
Contrarily, firms such as Penguin Group have already signed contracts to shift their operations to Brazil, citing what they perceive as ANDE’s “excessive greed.” Despite this, Sosa estimated that the Paraguayan government would garner $100 million in revenue from these cryptocurrency-mining operations this year. Industry experts suggest that the energy supplied to cryptocurrency mining operations accounts for 13% of ANDE’s total income, projected to rise to 20% once all pending projects are approved and start functioning.
Proposed Temporary Bitcoin Mining Ban Faces Stalled Progress
Recent legislative proposals in Paraguay lean towards reconsidering a contentious Bitcoin mining ban, with discussions set to occur later this month. Paraguayan senators have stalled progress on a proposed blanket ban on cryptocurrency mining introduced last week. Instead, officials are weighing the merits of selling surplus energy from the Itaipu hydropower plant to these miners rather than exporting it to neighboring Brazil and Argentina.
Senator Lilian Samaniego confirmed that a public hearing would be held on April 23 to analyze the pros and cons of Bitcoin mining in the nation. This comes shortly after lawmakers introduced a draft bill on April 4 intending to temporarily outlaw Bitcoin mining for 180 days, citing concerns that illegal cryptocurrency mines have been misappropriating power and disrupting the electricity supply.
Financial Benefits of Crypto Mining in Paraguay: A New Economic Perspective
However, days after this introduction, Paraguayan lawmakers approved a declaration on April 8 aimed at promoting local and foreign investment in infrastructure. Senator Salyn Buzarquis expressed hopes that this would spur the Paraguayan Ministry of Industry to study the economic potential of selling excess energy to Bitcoin miners.
In an April 8 correspondence to Congress, Buzarquis noted that 45 licensed cryptocurrency miners are on track to generate $48 million for ANDE by 2024, with expectations to reach $125 million by 2025 as miners enhance their operations. Given the cost of electricity production at the Itaipu hydropower plant is around $22 per megawatt-hour (MWh), ANDE could achieve a 45% net profit margin by selling surplus energy to local cryptocurrency mining operations at a rate of $40/MWh.
This translates to $73 million annually, contributing approximately $17 million in value-added tax to the treasury. Buzarquis emphasized that Bitcoin mining could potentially prevent ANDE from facing bankruptcy, reiterating, “This flow of funds is what is going to save ANDE from going bankrupt.”
The Future of Crypto Mining in Paraguay: Opportunities and Challenges
Currently, Paraguay sells energy to Brazil at a subsidized rate of $10 per MWh. Moreover, cryptocurrency mining could bolster employment opportunities in the local economy, as highlighted by Buzarquis during the April 10 senate session.
Despite the earlier April 4 bill’s concerns about illegal operations linked to 50 instances of disrupted power supply tied to cryptocurrency miners, industry experts argue that banning the entire sector may not be beneficial. Hashlabs Mining co-founder Jaran Mellerud cautioned against penalizing the lawful miners, emphasizing the need to address illegal operations instead. Stay tuned for more updates on this evolving story on the Turkish NY Radio.
