Despite Internal Opposition, Paraguay Paves Way For Crypto Regulation

Paraguay is seen by many as a potential hotspot for cryptocurrency adoption due to low electricity costs and relatively modest taxes. Recognizing this opportunity, the Paraguayan government has pushed forward with new legislation on digital assets.

On May 25, Paraguay’s Congress voted 40-12 to pass a bill regulating cryptocurrency trading, mining and custody. The bill must now be approved by the Senate and eventually go to President Mario Abdo Benítez.

If approved, the bill would apply to any individual or organization in Paraguay involved in the mining, commercialization, trading, transfer, production, custody or management of cryptocurrencies and related functions. The legislation proposes financial and legal security for businesses and individuals, while imposing limits on things like electricity spending and taxes.

For example, Article 11 of the Act states: “Cryptocurrency mining is considered an industrial and innovative activity. This activity will benefit from all the mechanisms and incentives foreseen in the national legislation.”

Regulation is not without its headwinds, though; both the Central Bank of Paraguay and the Budget Council have expressed opposition to the digital currency, calling it a “high-risk project that does no good for the country.” The statement also comes with widespread misgivings that cryptocurrencies aid the criminal industry and dramatically increase the cost of electricity.

Paraguay is one of several Latin American countries actively exploring the regulation of digital assets. El Salvador recognized Bitcoin as a legal tender in June 2021, starting the trend of Bitcoin legalization. Other countries where discussions on cryptocurrency regulation are underway include Brazil, Argentina, Uruguay and Panama.

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