Is Paraguay the cryptocurrency in Mecca? | international

It takes a lot of energy and a lot of hardware to unravel the string of tokens that make it possible to get bitcoin, the most. Popular cryptocurrency in the market. And if there’s one thing Paraguay has – besides soybeans, timber and a large number of cows – it is very cheap electricity. This is why more and more bitcoin generators are coming to this South American country, which, after France, Germany and Canada, is the fourth largest net energy exporter in the world, despite being landlocked and not having any petroleum or natural gas reserves. .

Since 2020, Paraguay has seen a growing number of domestic and foreign companies installing massive metal or concrete enclosures with rows of computers, fans and air conditioners in industrial spaces, but also in cities that were once forested – such as Ciudad del Este, San Pedro or Paraguarí – and in rural towns full of German grandchildren, like Villarrica. This phenomenon is due to some of the lowest electricity rates in the world, as well as legislation that offers mining companies many advantages, including lower energy prices, tax breaks, and a light regulatory framework.

Besides El Salvador or Venezuela, Paraguay has been discussing a regulation on crypto mining that is only waiting for approval or a veto from President Mario Abdo Benítez of the Colorado Conservative Party. For the 55-year-old president — a computer scientist and university professor by profession — the bill seeks to lower the costs of “industry [crypto] miner”, but does not provide tools or means of protection for “amateur, home or homemade miners”.

Benítez was one of the first to go online in the country in the 1990s. Since 2010 – before most of us even heard of cryptocurrency – he’s already been “mining” in his home in Asuncion. Today, he leads the largest discussion group on Telegram on this topic and is one of the founders of the Paraguay Blockchain Association, which is dedicated to promoting fair regulation of this activity.

“that they [the legislators] Referring to the crypto mining bill approved by the legislative branch, Benitez told El País:

Other initiatives are under discussion. One bill suggests that payments from crypto miners be made up front and in dollars; Another suggests that the government could take advantage of Paraguay’s energy surplus to exempt low-income families from paying the full price, rather than subsidizing wealthy foreign investors.

Where does Paraguay get so much energy from?

Responsible for the surplus energy are the long and very powerful Parana and Paraguay rivers, the waters of which are harnessed by the Itaipu and Yasereta dams. However, despite the fact that Paraguay – a country the size of France – generates a huge amount of electricity, it hardly has any industry or infrastructure to harness it. Paraguay’s seven million people don’t have access to trams, trains, or electric buses—every form of transportation is powered by fossil fuels, unless you choose to walk or cycle. In fact, the country’s total electrical energy consumption accounts for only 20% of the total energy use. About 42% of the oil comes (by imported fuel) and 38% of the biomass (by burning wood from Paraguay’s lush forests).

In Paraguay, small businesses – which make up about 90% of the state’s enterprises – connected to the low-voltage grid pay about $58 for a megawatt-hour of electricity… or the equivalent of using 90 liters of oil. However, some crypto miners pay as little as $18 per megawatt-hour. In comparison, the average price paid in other South American countries is around $100 per MWh.

Mercedes Caniz, former Deputy Minister of Mines and Energy of Paraguay, told EL PAÍS: “We support their energy … they [the crypto miners] You pay us less than when we issue.”

In recent years, other critical voices have increasingly suggested that Bitcoin consumes too much energy and generates a very large carbon footprint, prompting more and more companies to search for clean and cheap energy sources to continue mining.

“We have the energy and we give it … especially to Brazil,” Canizzi added, referring to an agreement that forces Paraguay to sell excess capacity to Brazil from the Itaipu Dam.

first news about Crypto mining In Paraguay in 2019, when companies linked to local politicians were caught stealing electricity to generate bitcoin. There are currently eight investigations open in the Paraguay Public Prosecutor’s Office on this matter.

Previously, only a few companies from Brazil had caused problems. They rented a place, rented mining for a few months and then disappeared without paying the electric bill. President Benitez explained that there are now Canadian, American, Russian and Chinese companies. He fears that if the legislative measure on cryptocurrency mining falls into law, foreign investors will have cheap energy without having to pay any taxes and only individuals with significant purchasing power will be able to mine for bitcoins.

Villarica fortune

In a city of about 60,000 people surrounded by fields of soybeans and cows, multinational blockchain companies such as Future FinTech and Bitfarm are now competing with local crypto miners. Together, there are now at least 30,000 ASICs in Villarica – the computers needed for Bitcoin processing.

In Villarrica, German immigrants built their own power line just a year before the dictatorship of Alfredo Stroessner, the longest in the Americas (1954-1989), a regime that took 30 years more than the locals to bring public power to the region. The German company, CLYFSA, still exists to this day, using legal tricks to remain independent and private. Some cryptocurrency mining companies are located next to their power station. CLYFSA buys state-subsidized electricity and provides it to its customers at a low price, starting at $18 per MWh. For this reason, Director of Future FinTech, Shanchun Huang, has expressed interest in “Hydroelectricity and Clean Energy Resources in Paraguay”. Huang has promised that FinTech will set up a “mining farm” if the company receives “preferential policy treatment”.

Christian Katz is a Paraguayan businessman of German origin, born and raised in Villarrica, who has done well in cryptocurrency mining. He owns an internet service company in his city, and two years ago, he jumped on the virtual mining bandwagon. He also considers himself a “local miner”, while also providing consultancy to other companies in the sector.

“There were a lot of people coming to Villarrica [crypto] Mining… I realized I was in the middle of a lot of companies bringing big investments to the city,” Katz recalls. He says he started with $1,000, but now an investment of $30,000 to $40,000 is needed to get started.

“It’s still profitable, but profitability has gone down a lot,” he explains. When he entered, the company promised a return on investment in one year. “Now two and a half years.

Katz believed that the state should formalize and collect taxes from foreign miners. He also acknowledges that while he checks the price of Bitcoin multiple times a day, he does not recommend others to do so.

“I cannot and do not want to live on mining alone. My advice is to see mining as something to do in your spare time… because it is something that will not last forever. It will not last for more than a few years.”

One of the main criticisms of cryptocurrency mining worldwide is its high energy consumption. Crypto Investors Defend Their Paraguay Projects Because Hydroelectric Power Plants Provide Renewable Energy…But For How Long? The Paraná River may be the second longest river in South America after the Amazon, but it has 50 dams upstream in Brazilian territory. And less than a year ago, there was a power crisis due to the lack of water in the Itaipu Dam, on which all of Paraguay depends.

Former Minister Kanese — an industrial engineer by training — opposes subsidizing crypto miners.

“Why, in the context of climate change, do we devote all that energy to something that doesn’t produce anything tangible and doesn’t create jobs? It’s a financial asset… that doesn’t generate wealth for our people.”