Paraguay paves the way for crypto regulation despite internal opposition

Paraguay is viewed by many as a potential hot spot for cryptocurrency adoption due to low electricity costs and relatively soft taxation. The government has recognized this opportunity by pushing forward new legislation around digital assets. 

On May 25, a bill that regulates cryptocurrency trading, mining and custody was approved by the Paraguayan Congress in a vote of 40 to 12. The bill must now be ratified by the Senate to finally reach President Mario Abdo Benítez.

Aprueban con modificaciones proyecto que regula la industria y comercialización de criptoactivoshttps://t.co/Z8kVoqVWWz@sebagar8 @DipNacBuzarquis @CelsoKennedy @tadeorojasm @bachinunez_nuez @luchozacariasAP @carlitosrejala pic.twitter.com/AlQ0Dh914S

— Cámara de Diputados (@DiputadosPy) May 25, 2022

If ratified, the bill would apply to any individual or organization in Paraguay involved in the mining, commercialization, trading, transfer, production, custody or administration of cryptocurrencies and related functions. The legislation proposes financial and legal guarantees to businesses and individuals, while also imposing restrictions on the matters of electricity spending and taxation.

For example, a translation of article 11 of the bill states: “Crypto mining is recognized as an industrial and innovative activity. This activity will be a beneficiary of all mechanisms and incentives foreseen in the national legislation ”

Regulations didn’t come without resistance, though; both the Paraguayan Central Bank and budget commission have expressed their disapproval of digital currencies, calling the movement a “high-risk project with no benefit for the state.” This statement was also accompanied by the usual suspicion that cryptocurrencies aid criminal enterprise and substantially increase electricity costs.

Related: Latin America’s largest digital bank will allocate 1% to BTC, offer crypto investment services

Paraguay is one of several Latin American countries actively exploring the regulation of digital assets. El Salvador began the trend of legalization in June 2021 by recognizing Bitcoin (BTC) as legal tender. Other countries with ongoing crypto regulation discussions include Brazil, Argentina, Uruguay and Panama.