Bitcoin

Is Paraguay the next cryptocurrency mecca? | International | EL PAÍS English Edition

It takes a lot of energy and several machines to unravel the chain of codes that makes it possible to obtain a bitcoin, the most famous cryptocurrency on the market. And, if there is something that Paraguay has, in addition to soybeans, wood and a huge cattle population, it is very cheap electricity. That is why more and more bitcoin generators arrive in this South American country which, after France, Germany and Canada, is the fourth largest net exporter of energy in the world, despite not having access to the sea and having no oil reserves or natural gas.

since 2020, paraguay has seen a growing number of local and foreign companies installing huge metal or concrete containers with rows of computing devices, fans and air conditioners in industrial spaces, but also in cities that were once jungles, such as Ciudad del Este, San Pedro or Paraguarí- and in rural towns full of German descendants, such as Villarrica. This phenomenon is due to some of the lowest electricity rates in the world, as well as legislation that offers mining companies various benefits, including lower energy prices, tax exemptions, and a light regulatory framework.

Reading: Paraguay bitcoin news

along with el salvador or venezuela, paraguay has been debating a regulation on crypto mining that only awaits the approval or veto of president mario abdo benítez, of the conservative colorado party. For the 55-year-old president – computer scientist and university professor by profession – this law seeks to lower costs for the “industrial [crypto] miner”, but does not provide tools or protections for the “hobbyist, domestic or homemade miner”. .”

benítez was one of the first to connect to the internet in the country in the 1990s. since 2010, before most of us had even heard of cryptocurrencies, he was already “mining” in his home in asunción. Today, he directs the largest telegram discussion group on the subject and is one of the founders of the Paraguayan association of blockchain, dedicated to promoting the fair regulation of this activity.

“They [the legislators] only met with the big mining companies, very hastily, without taking into account issues of energy or fiscal policy,” Benítez told the country, referring to the cryptomining bill approved by the power legislative.

p>

Other initiatives are also being discussed. a bill proposes that payments from crypto miners be made in advance and in dollars; Another proposes that the government take advantage of Paraguay’s energy surplus to exempt low-income families from paying full price, instead of subsidizing wealthy foreign investors.

Paraguayan President Mario Abdo Benítez steps off a plane upon his arrival in Bogotá, Colombia, on August 6.

Paraguayan President Mario Abdo Benítez steps off a plane upon his arrival in Bogotá, Colombia, on August 6.Carlos Ortega (EFE)

Where does Paraguay get so much energy?

Those responsible for the energy surplus are the very long and mighty Paraná and Paraguay rivers, whose waters are captured by the Itaipú and Yacyretá dams. However, despite the fact that Paraguay, a country the size of France, generates an enormous amount of electricity, it hardly has any industry or infrastructure to harness it. Paraguay’s seven million people don’t have access to electric trams, trains, or buses: all means of transportation run on fossil fuels, unless you choose to walk or bike. in fact, the total consumption of electrical energy in the country represents barely 20% of the total use of energy. About 42% comes from oil (via imported fuel) and 38% is generated from biomass (via burning wood from Paraguay’s lush forests).

See also: How to Put Crypto on a USB

in paraguay, small businesses -representing around 90% of the country’s companies- connected to the low-voltage grid pay around $58 for one 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. by comparison, the average price paid in other South American countries is around $100 per megawatt hour.

mercedes canese, former deputy minister of mines and energy of paraguay, told the country: “we are subsidizing their energy… they [cryptominers] pay us less than when we export.”

In recent years, other critical voices have increasingly pointed out that bitcoin consumes too much energy and generates a very significant carbon footprint, which has led more and more companies to seek clean and cheap energy sources to continue mining. .

“We have energy and we give it away… especially to Brazil,” added Canese, referring to an agreement that forces Paraguay to sell excess energy from the Itaipú dam to Brazil.

The first news about crypto mining in Paraguay came in 2019, when companies linked to local politicians were caught stealing electricity to generate bitcoin. There are currently eight open investigations in the Paraguayan prosecutor’s office for this matter.

“Before, only a few companies in Brazil caused problems. they rented a place, mined for a few months and then disappeared without paying the electricity bill. but now there are canadian, american, russian and chinese companies”, explained president benítez. he fears that if he enacts the crypto mining bill, foreign investors will have cheap energy without paying taxes and only people with substantial purchasing power will be able to mine bitcoins.Workers at a bitcoin mine in Whinstone, Texas.

Workers at a bitcoin mine in Whinstone, Texas.MARK FELIX (AFP)

The wealth of Villarrica

In a city with a population of around 60,000, surrounded by soybean fields and cows, multinational blockchain companies such as future fintech and bitfarm are now competing with local crypto miners. In total, there are now at least 30,000 asics in Villarica, the computers necessary for bitcoin processing.

in villarrica, german immigrants built their own power lines just a year before the dictatorship of alfredo stroessner, the longest in america (1954-1989), a regime that took 30 years longer than the locals to bring public power to the area. The German company, Clyfsa, continues to exist to this day, using legal tricks to stay independent and private. some crypto mining companies are located next to their power station. clyfsa buys subsidized electricity from the state and offers it to its customers at a low rate, starting at $18 per megawatt hour. for this reason, the director of future fintech, shanchun huang, expressed his interest in “paraguay’s hydroelectric and clean energy resources”. Huang has promised that the fintech will set up a “mining farm” if the company receives “preferential policy treatment”.

See also: Why Bitcoin Will Succeed | Alexandria

Christian Katz is a Paraguayan businessman of German origin, born and raised in Villarrica, who has done very well with cryptocurrency mining. He owns a company that provides internet service in his city and, a couple of years ago, he jumped on the virtual mining bandwagon. he also considers himself a “domestic miner”, at the same time that he advises other companies in the sector.

A street in Guairá.

A street in Guairá.Santi Carneri

“There were many people coming to Villarrica for [crypto] mining… I realized that I was in the middle of several companies bringing large investments to the city,” Katz recalls. He says that he started out with $1,000, but now an investment of between $30,000 and $40,000 is needed to get started.

“It’s still profitable, but profitability has dropped a lot,” he explains. when he entered, the business promised a return on investment within a year. “Now it’s two and a half years.

katz believes the state needs to formalize and collect taxes from foreign miners. he also acknowledges that while he checks the price of bitcoin several 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 that you see mining as something to do in your free time… because it is something that is not forever. it won’t last more than a few years.”

A bitcoin ATM machine in Paraguay.

A bitcoin ATM machine in Paraguay.Santi Carneri

One of the main criticisms of cryptocurrency mining around the world is its high energy consumption. Crypto investors defend their ventures in Paraguay because the hydroelectric plants offer renewable energy… but for how much longer? The Paraná River may be the second-longest in South America after the Amazon, but it has 50 dams upstream in Brazilian territory. And, less than a year ago, there was an energy crisis due to the lack of water in the Itaipú dam, which all of Paraguay depends on.

former minister canese -an industrial engineer by training- opposes the subsidy for crypto miners.

“Why, in the context of climate change, dedicate all that energy to something that does not produce anything tangible and does not create jobs? it is a financial asset… it does not generate wealth for our people.”

See also: Bitcoin Mining Facility Shut Down Following Sharp Decline In Miner Profitability | Bitcoinist.com

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button