Paraguayan Senate Passes Bill Regulating Crypto Trading and Mining

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Updated: Jul 18, 2022, 10:32 GMT+00:00

A bill that has been passed by both chambers in the Paraguayan Senate awaits the President's approval

Key Insights:

Paraguay has passed a bill that establishes tax and regulatory rules for businesses.
Companies operating in the crypto sector will be exempt from paying a value-added tax.
Individual and corporate crypto miners will need to report their energy consumption schedule to the National Electricity Administration.

After a year of deliberation and discussion on a comprehensive crypto framework, Paraguay has passed a bill that establishes tax and regulatory rules for businesses operating in the cryptocurrency and mining sectors.

The bill was introduced last year by Senator Fernando Silva Facetti and passed in Congress in May, with a heavy focus on the formation of a Ministry of Industry and Commerce (MIC) to oversee crypto industry service providers.

Modifications to the Bill

When the Chamber of Deputies passed the bill in May with modifications, there was an understanding that Paraguay’s Industry and Commerce Secretariat will supervise crypto mining within the country, while the National Securities Commission, Anti-Money Laundering Office and National Electricity Administration (ANDE) will regulate activities.

With these elements in place, the bill was then returned to the upper chamber and has now been approved by the Paraguayan Senate. Senator Facetti has stated that the modifications made to the bill “improved the original project”.

The main modification proposed by the Chamber of Deputies related to the primary law enforcement authority, the Ministry of Industry and Commerce, being given powers to penalise individuals or legal entities carrying out mining or providing cryptocurrency services without authorisation.

Alongside this, a registry for individuals or legal entities aiming to provide crypto trading or custody services for third parties has been created. Importantly, the National Securities Commission will be in charge of the commercialisation of obtained assets.

Also, companies that operate in the crypto sector will be treated the same as those dealing with securities for tax purposes. They will be exempt from paying a value-added tax (VAT), but will be included in the income tax regime.

The bill, which specifically pertains to crypto mining, commercialisation, intermediation, exchange, transfer, custody, and/or administration of crypto assets or instruments, is one step away from being ratified as law by President Mario Abdo Benítez.

Industrial Electricity Consumption

A crucial part of the bill stipulates that the National Electricity Administration will manage energy supply, while the Secretariat for the Prevention of Money or Asset Laundering will supervise investment processes carried out by crypto companies.

This means that individual and corporate crypto miners will need to request authorisation for industrial electricity consumption and apply for a license. They can do this by reporting their energy consumption schedule to the National Electricity Administration.

Notably, if miners breach ANDE’s quota for consumption, their electricity supply may be cut off as a result.

A Congressman who played a key role in authoring the bill, Carlos Rejala previously stated that the law aims to attract international miners who use low electricity rates, at around 5 cents per kilowatt-hour. For context, Bitfarms is one of the biggest mining players operating in Paraguay and has a 10 megawatt facility located in Villarica.

Criticism has mainly come from Senator Enrique Bacchetta who has questioned whether the bill will actually create jobs for citizens. His views have been echoed by Senator Esperanza Martinez who claims that the energy consumption rate from miners far outpaces the number of jobs they would create.

About the Author

Mohadesa Najumiauthor

Mohadesa Najumi is a British writer who has worked within crypto, forex, financial technology, and the stock market industry. Mohadesa received her MSc in Political Science and International Relations at the University of Amsterdam.