Paraguay intends to crack down on illegal block reward miners as the country’s grid operator struggles with rising electricity losses.
South America is increasingly becoming a hub for miners, with cheap energy and loose regulations among the draws for the sector. But while most miners operate legally and have obtained licenses from authorities, illegal miners have emerged as a threat to national electricity networks.
In Paraguay, the national grid operator Administración Nacional de Electricidad (ANDE) estimates that electricity losses have hit 28.5%, up from 26%, in the past three years. The losses have been concentrated in six departments, including Central, Alto Parana, and Itapua, three of the largest in the country.
A significant share of the losses is attributed to illegal miners. ANDE revealed earlier this year that these miners are sapping $60 million worth of electricity from the national grid annually, enough to power an entire city. Since 2019, ANDE claims to have shut down over 70 illegal operations, but their operators rarely face any legal action as the law on digital assets is still unclear.
This has forced the government to develop the “Masterplan for the Management and Control of Electrical Losses in Distribution” framework for the next decade, and wiping out illegal miners is one strategy it believes can curtail the losses.
While acknowledging the need to crack the whip on illegal miners, Paraguay’s digital asset industry has called on regulators to protect the licensed miners. The country’s Mining and Crypto Assets Chamber raised concern that the sector is already struggling with rising energy rates and that any more disruptions could significantly dent the miners’ operations.
The Chamber has previously claimed that miners have invested a cumulative $900 million in Paraguay and created over 1,100 direct jobs and many more indirectly. Miners are also reportedly required to pay 50% more for energy than other industries, which boosts the income for ANDE.
One of the global miners that have invested in Paraguay is HIVE Digital (TSXV: HIVE | OTCQX: HVBTF | FSE: HBF). Last month, the company purchased 6,500 ASIC miners destined for the Latin American country and broke ground on the construction of new mining facilities.
It’s not all smooth sailing for block reward miners in Paraguay. One of the most significant hurdles is regulations; President Mario Abdo is a staunch critic, and two years ago, he vetoed a bill passed by Congress that would have recognized mining as an industrial activity.
“If Paraguay wants to intensify crypto mining today, in the next four years, it will be forced to import electricity,” the president reasoned in his decree.
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