Paraguay, one of the countries with the lowest HDI in the region, has emerged as an attractive hub for Bitcoin miners. Hydroelectric power is the fundamental pillar of the Paraguayan energy economy. One of the main obstacles is the lack of a clear and defined regulation for cryptocurrency mining.
Against the backdrop of the dizzying growth of the mining industry in Latin America, Paraguay has emerged as an attractive hub for Bitcoin miners.
This country, with an HDI lower than the average of the countries in the region, has experienced a significant increase in Bitcoin mining activity thanks to its energy surplus. Added to this are recent legislative efforts to regulate and promote this emerging industry.
Energy Surplus as an Engine for Bitcoin Mining
Hydroelectric power is the fundamental pillar of the Paraguayan energy economy. The famous Itaipu dam, located on the Paraná River, generates a staggering 14 gigawatts (GW) of electrical power. But most importantly, it represents more than 99% of the country’s energy supply.
In addition to Itaipu, Paraguay has two other important dams, Yacyretá and Acaray, which also contribute to the country’s energy surplus.
Itaipu Binacional, in operation since 1984, held the prestigious title of “the largest energy producer in the world”, having produced a record figure of 103,098,366 MWh in 2015. It is also recognized as the dam with the highest accumulated production, reaching 2.5 billion MWh since it began operations.
With an impressive electro-hydraulic generation capacity of 14,000 MW, Itaipu has 20 generating turbines of 700 MW each. Building this colossal dam required an investment of 36 billion dollars, shared between the two partner countries.
This energy surplus has turned out to be the main attraction for Bitcoin miners, who find Paraguay a favorable place to establish their operations. Abundant clean and low-cost energy allows miners to maintain significant profitability in their activities.
Paraguay as a Growth Center for Bitcoin Miners
According to the data analysis carried out by the Hashrate Index platform, Paraguay already hosts more than 1.45% of the total hashrate of the Bitcoin network. Although this may seem like a modest percentage compared to other nations, it is important to note that this growth has been largely driven by the exodus of miners from China in mid-2021.
Furthermore, the number of miners operating from Paraguay is likely to be higher than estimated. This is because many of them use virtual private networks (VPN) to protect their identity and location. This figure may increase in the future as more miners seek to establish themselves in the country.
Legal Challenges for Bitcoin Mining in Paraguay
Although Paraguay shows great potential as a Bitcoin mining hub, it is not without its challenges that need to be addressed to further fuel the growth of the industry.
One of the main obstacles is the lack of a clear and defined regulation for cryptocurrency mining. The absence of solid and secure legal frameworks can create uncertainty for the participants, who wish to operate within a regulated and protected environment.
On the other hand, there is the fiscal aspect, since this activity could be used for tax evasion, not to mention the clandestine farms that maintain a parasitic behavior, causing millions in energy losses to Paraguay’s National Energy Administration.
All in all, the combination of natural resources, infrastructure, and the growing interest in cryptocurrency make the country a promising place for the development of this innovative and constantly evolving industry.
By Audy Castaneda
