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Paraguay’s Passes Bill To Regulate Crypto, Targets Mining Companies

The Senate of Paraguay has passed a bill on Thursday that aims to regulate cryptocurrency mining and trading in the country.

Bill Seeks To Regulate Crypto Trading

On Thursday, the Senate of Paraguay enacted a law aimed at regulating Bitcoin and cryptocurrency trading and mining in the country. Senator Fernando Silva Facetti, the bill co-author, said on Twitter that the bill will now be debated in Paraguay’s Chamber of Deputies in 2022.

In Paraguay, the bill does not make bitcoin legal tender. During a conversation with Paraguayan Congressman Carlitos Rejala in July, an exclusive peek at the draft bill was released. The bill hinted at stronger regulatory oversights from the country’s regulators when it came to bitcoin mining, as well as an overarching purpose of providing investor safeguards from enterprises that offer bitcoin services.

Rejala said at the time,

“With this we want to welcome the innovation of cryptocurrencies in Paraguay to the world. This is the result of a very strong and arduous teamwork of many experts in the field, both local and foreign.”

According to the bill, the Industry and Commerce Secretariat will be in charge of overseeing crypto mining in the country, with the support of the Anti-Money Laundering Office and the National Securities Commission. Meanwhile, the National Electricity Administration will be involved in the activity’s regulation.

Meanwhile, despite not explicitly stating the concept of an exchange, the bill plainly suggests some form of record-keeping for any individual or established business entity interested in providing crypto trading or custody services to others.

Related article | South American Countries Are Interested In Adopting Bitcoin: Who Will Be Next?

Paraguay Targets Crypto Miners

The bill recognized that Paraguay consumes barely one-third of the energy it produces is also included in the bill. Crypto mining activities, if controlled, would almost certainly compensate for the thousands of megawatts of electricity that Paraguay currently does not utilize.

In summary, the law aims to take advantage of the Latin American country’s surplus energy, and it will be debated by the Chamber of Deputies in 2022, as previously stated.

Bitcoin miners might benefit from “thousands of megawatts that Paraguay currently has as surplus,” according to the bill, assuming it falls under the country’s restrictions. The industry would be controlled jointly by the Ministry of Industry and Commerce, the National Securities Commission, the Anti-Money Laundering Office, and the National Electricity Administration in Paraguay, according to the legislation.

The cost of electricity in Paraguay, which is the lowest in the region at roughly $0.05 per kilowatt-hour, is one of the key attractions for mining companies, according to congressman Rejala, who added that nearly 100 percent of energy output originates from hydroelectric sources.

BTC crashes to $46k | Source: BTCUSD on TradingView.com

Related article | Calls For Tesla To Resume Bitcoin Payments As Mining Reaches 57% Renewable Energy

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Top Economist Calls Bitcoin As Legal Tender “Stupid”. Here’s Why He’s Wrong.

Let’s not kid ourselves, a person like Steve Hanke has enormous incentives to defend the status quo. He’s benefited tremendously from it. It could be argued that his livelihood depends on Bitcoin failing. A project to make it legal tender in any country goes directly against Hanke’s interests, and it’s no wonder he spoke against it. The insult was over the line, though.

We´re going to take the higher road and elegantly answer all of his points. The tweet in question was this one:

Is Bitcoin A Store Of Value?

Who decides this? The people. If one person uses an asset to safeguard his wealth, then it’s a store of value. The question then is, is Bitcoin an effective store of value? Well, considering it’s the only commodity in the history of the earth that presents absolute scarcity, it’s probably a safe bet. Make no mistake, though, it’s still a bet. The Bitcoin experiment is an ongoing process and nothing is set in stone.

Related Reading | Why Bitcoin Declared Legal Tender Could Have Major Implications Beyond El Salvador

Scratch that, one thing is set in stone. There will only ever be 21 million bitcoins. The supply is fixed, so if the demand increases, the price will go up. It’s as simple as that. To add credibility to the argument, let’s quote Saifedean Ammous’ “The Bitcoin Standard”:

Until Bitcoin’s invention, all forms of money were unlimited in their quantity and thus imperfect in their ability to store value across time. Bitcoin’s immutable monetary supply makes it the best medium to store the value produced from the limited human time, thus making it arguably the best store of value humanity has ever invented. To put it differently, Bitcoin is the cheapest way to buy the future, because Bitcoin is the only medium guaranteed to not be debased, no matter how much its value rises.

Did you know that 40% of all US Dollars that have ever existed were printed in the last twelve months? That’s what debasement looks like. And the whole world is feeling its effects. 

Is Bitcoin A Medium Of Exchange?

Our friend Steve Hanke was answering Paraguay’s congressman Carlos Rejala but, as you probably know, the first country to approve bitcoin as legal tender was El Salvador. This is not a coincidence, since “a real village with real Bitcoin uses in daily life” is right there in El Salvador. 

The Bitcoin Beach project is also the main real-life use case for the Lightning Network. If there’s a place in which small Bitcoin transactions are an everyday thing, it’s this one. As Nasdaq informed last year, when the project was still developing:

In the flagship Bitcoin village of El Zonte, for example, you can use bitcoin to pay for a haircut, get your nails done and chow down on some local dishes (like some delicious pupusas). Soon, you’ll even be able to buy a cup of coffee with it and go to the doctor’s office for a checkup.

If there’s any doubt that Bitcoin Beach was the inspiration for El Salvador’s historic move, Stephan Livera paraphrases what President Bukele said on Clubhouse: 

So yeah, Bitcoin is a proven medium of exchange with real-life use cases. We could include the incredible amount of Bitcoin transactions that the virtual world sees every day, but there’s no need.
BTCUSD price chart for 06/09/2021 - TradingView

BTC price chart on Bitbay | Source: BTC/USD on TradingView.com

Is Bitcoin A Reliable Unit Of Account?

Let’s admit it, Bitcoin’s price is volatile. Why is that? Let’s quote “The Bitcoin Standard” once again:

As it stands, given that Bitcoin constitutes less than 1% of the global money supply, large individual transactions in Bitcoin can have a large impact on price, and small variations in demand can cause large swings in price. This, however, is a feature of the current situation where Bitcoin as a global settlement network and currency is still a tiny fraction of global settlement payments and money supply.

Bitcoin is still in its infancy. You can’t ask a 12-year-old child to behave like an adult. What does it need to grow? Nurture. And since it IS a currency, nurture is equivalent to widespread adoption. This is exactly what’s happening, with all of these countries considering emulating El Salvador in making Bitcoin legal tender. 

Related Reading | Time To Pay Attention: Bitcoin Indicator Behavior Mimics Historic Rally

If Bitcoin becomes the global reserve currency of the world, volatility won’t be a problem. And the whole planet will be a level playing field because one country won’t have the immense privilege of issuing the global reserve currency. And debasing it at will.