Despite being one of the smallest countries in Latin America, Paraguay is driving much of the Bitcoin mining activity happening in the region.
Cryptocurrency miners are taking advantage of Paraguay's energy surplus, which is a major producer of hydroelectric power, to boost Bitcoin mining. In addition to this, it is worth remembering that the country's legislators are working on creating a legal framework to regulate this activity and encourage the development of the industry.
According to Bitcoin mining data analysis platform Hashrate Index, Paraguay has become an attractive hub for mining bitcoins, hosting more than 1,45% of the hash rate that the network currently has.
While this may seem like a small number compared to other countries and regions around the world, crypto mining activity has gained significant momentum in Paraguay since the exodus of miners from China in mid-2021. Hashrate Index also notes that the number of miners operating from Paraguay, and therefore the percentage of hash rate in the country, may be higher considering that many miners are using VPNs.
Itaipú, Paraguay's main attraction for Bitcoin mining
The Itaipu Dam, built on the Paraná River, generates 14 gigawatts (GW) of hydroelectric power, which represents more than 99% of the electrical energy used by the country.
However, according to Hashrate Index, Paraguay has two other important dams, Yacyretá and Acaray, which guarantee the country an energy surplus that can be exported. Paraguay's population is not able to consume all the hydroelectric energy produced, Hashrate Index indicated, so it exports a significant part to countries such as Brazil and Argentina.
It is precisely the energy power of these hydroelectric plants that is the greatest incentive for Bitcoin miners to move to Paraguay.
Energy rates
Although Paraguay is a promising haven for Bitcoin miners, the industry is not immune to risks.
El report indicates that some of the factors that can affect the development and growth of Bitcoin mining in Paraguay are energy rates. Added to this is the lack of clear regulation on mining activity and the crypto industry, as BTC miners must manage a large number of requirements before being able to legally set up and operate in the country.
On the other hand, Paraguay's climate can also affect Bitcoin mining. With temperatures reaching up to 100 degrees Fahrenheit (100ºF) in the summer and an average annual humidity of 70%, the climate can work against air-cooled Bitcoin mining farms and centers, which require more sophisticated cooling systems to prevent high temperatures and humidity from shortening the lifespan of mining equipment.
Bitcoin Mining Bill
In mid-2021, Congressman Carlos Rejala introduced a bill to regulate Bitcoin mining in Paraguay. Despite the fact that this bill was approved by the Chamber of Deputies and the Senate with the majority of votes, Paraguayan President Mario Abdo Benítez vetoed the project in August of last year.
The bill presented by Rejala focused, among other things, on recognizing Bitcoin mining activity to take advantage of the country's abundant energy surplus, creating sufficient incentives to boost the development of this industry, in addition to creating a regulated environment that provides security and confidence to investors and participants.
Although regulation remains a major barrier for Bitcoin miners in Paraguay, the country's energy benefits remain a major draw and could make Paraguay the leading Bitcoin mining hub in Latin America in the medium term.
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