Jaran Mellerud, co-founder and chief mining strategist of Hashlabs Mining, says Paraguay could potentially experience economic losses exceeding $200 million if the nation moves forward with a legislative proposal to ban cryptocurrency mining. Mellerud’s comments follow a draft bill introduced on April 4 that aims to place a temporary ban on cryptocurrency mining operations.
Mellerud emphasized the importance of Bitcoin mining to the national economy. He argued, “Banning Bitcoin mining could cost Paraguay more than $200 million a year,” adding that legal mining operations currently consume around 500 megawatts at an operating expense of $0.05 per kilowatt-hour.
The bill was motivated by disruptions to the electricity network attributed to unauthorized mining activities. As such, it proposes a 180-day ban on crypto mining until new regulations are established. This period is intended for the national power grid operator ANDE (Paraguay’s National Electricity Administration) to ensure sufficient energy supply.
Paraguay’s economy, with a gross domestic product of $41.7 billion and a population of 6.8 million as of 2022, benefits from the cryptocurrency mining sector. Mellerud argued that Bitcoin mining has made a “significant, positive contribution to Paraguay’s trade balance” so far.
The Itaipu hydroelectric Dam, a key electricity provider for Paraguay, has attracted miners due to its excess electricity capacity. The excess power has historically been exported to Brazil at low prices. Recently, Bitcoin miners have begun purchasing this surplus energy at slightly higher rates, a trend that could be halted by the proposed legislative measures.
Regulators indicate that the need for such a measure stems from growing concerns over cryptocurrency miners illegally tapping power sources. This issue has been linked to 50 cases of power supply interruption since February.
In his concluding remarks, Mellerud acknowledged the potential harm of illegal mining operations, noting: “Illegal operations can be harmful to the grid if it draws too much electricity from low voltage lines.”
The draft bill encompasses a wide array of restrictions, including the creation, storage, and commercialization of virtual assets and the establishment of mining farms on Paraguayan soil. Moreover, the proposed legislation outlines sanctions for violations, which could range from financial penalties to criminal charges.
The legislation could have far-reaching implications for Marathon Digital Holdings, one of the industry’s largest players. The mining giant began setting up operations near the Itaipu hydroelectric power plant in November 2023.
