The Paraguayan Senate passed a bill regulating Bitcoin last week in the hopes that the Latin American nation will become the second country in the world to accept cryptocurrency as legal tender.
The passage of the bill follows months of discussion, debate, and the development of the bill that will tax cryptocurrencies, regulate crypto mining and potentially legalize Bitcoin, the most widely used cryptocurrency.
If that happens, Paraguay would be the second country in the world to recognize cryptocurrency as legal tender after El Salvador introduced it in September, according to a tweet by the Paraguayan Senator Fernando Silva Facetti, one of the three authors of the measure.
Paraguay’s Chamber of Deputies must pass the law and be signed by President Mario Abdo Benitez before it becomes law. The lower chamber will discuss the draft law in 2022.
The most important parts of the invoice received from Capital.com include:
- Creation of a four-person application authority to oversee the public supply of digital assets, prevent money laundering and monitor the country’s electricity needs related to crypto mining. The National Electricity Administration, National Securities Commission, Anti-Money Laundering Bureau, and Industry and Commerce Secretariat would regulate the activities. All mining setups require approval and supervision by these authorities.
- Cryptocurrency miners must purchase a virtual asset mining license. Miners who do not receive the legal license would face sanctions.
- Creation of “monitoring and control mechanisms for transactions with virtual assets in cryptocurrency”. Failure to comply with the transitional surveillance system can result in sanctions.
- Recognize virtual asset mining as “a new innovative and electro-intensive industry”.
- Give token holders the right to profitability or “benefit from investment project called utility token”. In the case of a security token, the holder reserves “a share of the capital invested in the development of the project”.
- Trading companies, probably stock exchanges, “must inform the acquirer of the trading conditions with virtual assets and expressly point out that the virtual assets are not recognized as legal tender and are therefore not supported by the Central Bank of Paraguay,” according to the bill.
Not El Salvador
The bill, known as the Paraguay Bitcoin Law, was first promoted by Senator Facetti in July, weeks after El Salvador Congress passed its cryptocurrency laws. At the time, Silva told a domestic newspaper that the aim of the bill was to regulate a currency that was “already widespread”.
“This is not legal tender, this is a commodity and the purpose of the law is to regulate and control this industry,” was Silva quoted in La Nacion, the country’s leading newspaper.
Later, Silva and other lawmakers made it clear that the law is different from what El Salvador’s politicians passed this summer.
In June, Reuters quoted Senator Carlos Rejala as saying, “It is a list of digital assets and it is different from El Salvador’s because they consider it legal currency and in Paraguay it will be impossible to do such a thing” , Rejala said.
Since then, some politicians have stated on Twitter and the local press that they hope this legislation paves the way for Bitcoin to become legal tender.
And like in El Salvador, the bill would allow digital asset companies to fund their national businesses with cryptocurrency, send dividends overseas, and capitalize on their profits, according to La Nacion newspaper.
energy
Paraguay is one of the largest net energy exporters in the world and covers almost all of its electricity needs from hydropower. About 90% of the energy produced is exported, mainly to the neighboring countries Argentina and Brazil.
Three hydropower projects – two of them binational – supply each of the country’s 7.3 million citizens with electricity. The giant Itaipu Dam – operated in partnership with Brazil – has the second largest production capacity among hydropower projects in the world, accounting for 86% of Paraguay’s electricity generation and meeting all of the country’s domestic electricity needs.
Just 10 km away is the smaller Acaray Dam, which provides around 3% of Paraguay’s generated electricity. The Yacyreta Dam, meanwhile, is operated in partnership with Argentina and is responsible for about 11% of the electricity generated in Paraguay. according to to the CIA Factbook, which is published by the US government.
Paraguay attractive to crypto miners
Paraguay has the lowest energy bills in the region at around $ 0.05 per kilowatt hour, which is incredibly attractive to mining companies.
According to the bill, the South American country only consumes a third of the energy it produces. The introduction goes on to say that cryptocurrency mining with regulations “could use thousands of megawatts (electricity) that Paraguay currently has in surplus”.
Because Paraguay is powered by renewable energy, it has lower tariffs than any other country in South America, which translates into digital assets that can be mined at a basic environmental cost. This gives the nation an edge over other countries when cryptocurrency companies are scouting locations.
This was revealed recently when Chinese corporations showed an interest in setting up mining facilities in South America. In October, the Chinese e-commerce and fintech company Future Fintech announced the construction of a Bitcoin mining facility in Paraguay.
Read More: Is Bitcoin Adoption In El Salvador A Good Idea?
Read more: Bank of America sees upward trend in El Salvador’s Bitcoin bet
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