We all expected Paraguay to become the second nation in the world to adopt bitcoin as a legal tender, but the recent “legal framework” proposed by MP Carlitos Rejala and Senator Fernando Silva doesn’t go as far as that of El Salvador. The country’s legislation is treating Bitcoin as a commodity and end product, and bitcoin mining is considered a very important project.
The new bill proposed to the Chamber of Deputies highlights all the necessary bitcoin mining and crypto-assets requirements to be regulated and commercialized. We see great interest from the government in licensing virtual asset mining and leveraging renewable hydroelectric energy supply. The South American country is confident that hydroelectric power can facilitate 100% renewable BTC mining. This is where it gets interesting.
Paraguay is a Pioneer in renewable energy Supply
The real reason why 100% renewable mining is not far-fetched in Paraguay is their two large hydroelectric dams: Itaipu and Yacyreta. In 2016, we saw these dams provide 98% of Paraguay’s electricity generation, and 70% of it was exported to neighbouring countries- Argentina and Brazil. In 2018, the country only consumed 35% of the total power supply.
Over the years, we have seen Paraguay make billions of dollars by exporting electricity, and it was also assisting their GDP growth by 7.7% and overall financial situation in the country. However, the country was underselling electricity for its worth as they signed an agreement with neighbouring countries for 50 years. Now that agreement holds true for only one more year, so the government of Paraguay can make use of that excess electricity in multiple ways, including a bitcoin mining operation.
Currently, the bitcoin mining network requires 135 TWh/year and Paraguay’s dams are estimated to generate a little over 30 TWh/year. If the government could find a way to redirect that energy to bitcoin mining, it would instantly be one of the largest bitcoin mining operators in the world. In 2016, the total energy generated was 63.8 TWh, so we can expect that to be much higher now, as there have been many improvements and upgrades in the dams’ back-end operations.
Virtual Asset Mining Licence is compulsory
If bitcoin mining requires an authorized licence, then we are one step closer to industrial centralization. We understand the government wants to protect its investors by safeguarding their private keys that are in possession of a bank or exchange.
But that is not the real issue here. If someone wants to mine BTC at a smaller scale and enjoy ownership of their assets, they should be able to, but with this new bill, only those who perform bitcoin mining at a larger scale will get authorization. Other than that, the proposed framework is showing promise in strictly regulating and monitoring bitcoin mining activities.
Why is Paraguay the best investment right now
Yes, the country did not consider bitcoin as a legal tender. Yes, the law does not exempt miners with low computing power. But it is one of the most financially fertile countries. With zero taxation on capital gains, investors would be very interested in allocating capital for one of the well-established financial centres in Central America.
For Paraguay to be a top bitcoin mining contributor, they need clean, renewable energy and labour force, and they have all of it in huge proportions. The country has the highest youth labour force and is ready to commit a huge fraction of its renewable energy for bitcoin mining operations.
With so much upside, we can expect a boatload of investors partnering with companies to make bitcoin mining as successful as possible. It can be slow progress, but that is how mass adoption will sustain longer.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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