This blog is the product of a University College London (UCL) student internship at TEDIC and does not necessarily reflect the views of the organization.
Cryptocurrency mining (aka. “cryptomining”) – the energy intensive process of using computers in data centre “farms” that produce or “mine” cryptocurrencies like Bitcoin – has been getting a lot of attention in the last 6-months in Paraguay.
Private sector companies and some policymakers have been the conversation, with relatively little representation or participation from civil society. This blog post is one step to bridge that gap – answering some key questions to understand where Paraguay is on this technological journey.
This blogpost builds on the interest of the TEDIC organisation in the impacts of cryptomining in the Paraguayan territory. Concretely TEDIC has previously conducted investigations into three key topics in this space, publishing a series of blog posts and research reports: considering the environmental impact of mining, exploring the involvement of the Paraguayan state in the crypto and blockchain ecosystems, and putting a spotlight question on how Paraguay should be using its cheap energy and who benefits.
Who are the main actors involved?
Private sector. Between 50 and 70 companies reportedly have contracts with ANDE 1to use electricity for cryptomining. These are a mixture of Paraguayan entities (i.e., Penguin) and larger foreign companies from countries such as Canada (Bifarms & pow.re), USA (Delta) and China (Muyden). Some of these actors from the private sector are represented in industry lobbying groups, such as the Camara Paraguaya de Fintech (Vertical Blockchain) and Cámara Paraguaya de Mineria de Activos Digitales (CAPAMAD)
Illicit mining groups. There is also a large number of clandestine actors that steal energy from the electricity grid to power their mining sites. This year has seen ANDE increase its efforts to intervene on these “illegal” operations, claiming that they are a threat to the stability of the grid and emphasising the massive financial loss that stealing electricity incurs on the state energy company. Meanwhile, there have also been allegations that officials from ANDE are working with illegal miners to help them locate and install the equipment in hidden locations.
Policymakers. Political awareness and support for legal miners has been varied. Some Senators have developed a pro-mining narrative, emphasising that mining presents a great economic opportunity for Paraguay. However the Ejecutivo’s response has been more ambivalent: although the President posted a video visiting a major mining site in April, he has since been more tentative to show support for the industry. The Minister for Industry & Commerce, Javier Giménez, has been more positive about mining, also suggesting in an interview that the President sees the potential of the industry.
How is it being regulated?
Miners are expected to pay ANDE for energy according to a legal decree from 2022. According to Decreto N° 7824/22, which sets the tariffs for miners as a grupo consumo intensivo especial, the price for energy ranges from $44.28 – $59.89 per MWh depending on the requirements of the operations. There has been pressure from some opposition political parties and civil society to raise the tariff so that it sufficiently accounts for transmission, distribution and grid maintenance costs. ANDE recently announced it was raising the tariffs, claiming that it needed to cover the increase in cost for power from Itaipu 2. Whilst the President affirmed that this price would not put off foreign investment, ANDE’s decision received lots of public push back from companiesand politicians linked to mining. Concretely, such push back has challenged the premise ANDE has used for the price increase, suggesting that the real cost of energy from Itaipu has gone down relative to 2022. Alongside these arguments, claims have been made that Paraguay will lose out on the benefits foreign investment because of this increase in price, with miners reportedly looking to relocate to Brazil.
Until now, the sector has been more or less self-regulated. But the tide appears to be changing, with as many as 5 bill projects having been submitted since April 2024 that have the regulation of crypto as their focus. In relation to mining, the most significant of these has been a proposed prohibition of activity for 180 days whilst the government was to consider how best to control the industry. However, the direction of this legislative push changed after weeks of lobbying from the private sector resulted in miners and senators giving evidence in favour of mining during an audiencia publica – leading to the proyecto being postponed indefinitely shortly after.
One outcome of conversations concerning prohibition, has been a focus on updating the penal code to criminalise the stealing of electricity in illegal mining operations. The proposed changes to Article 173 of the Código Penal, which have been supported by the Ejecutivo, mean that anyone found guilty of stealing electricity for criptomining will be subject to up to 10 years in prison. This law has now been approved by the Ejecutivo, and sanctioned by congres, with ANDE making it very clear that the law applies now and has put multiple adverts on its homepage to ask electricity users to report the stealing of energy.
Meanwhile, a proyecto submitted at the end of May to register mining as an industry appears to have a strong political following. This proyecto, a reminder of an effort to regulate the industry that was eventually vetoed by the president in 2022, proposes to improve transparency of mining companies so that it deter illegal mining and the use of mining for money laundering. It also proposes to ensure that environmental standards are complied with.
What is currently done to address environmental impact?
As with other business activities and industries, miners are supposed to submit an environmental impact assessment to the Ministry of Environment and Sustainable Development (MADES by its Spanish acronym). This includes: submitting various technical data on their projects (e.g. how it affects local waterways), consideration of how chemical substances are released during construction, and how solid waste (including used electronic equipment) must be dealt with carefully and handled by recycling entities that operate according to the country’s environmental law. However, according to correspondences with people working in cryptomining, and research (p.14) previously conducted by TEDIC, many companies are not compliant and do not even bother to conduct impact assessments.
Moreover, there is no visibility on how wasted equipment is dealt with in reality. And whilst electronic waste is not a unique problem to Paraguay and crypto mining machines, the country is behind in terms of regulations to address the challenge. This contrasts with examples seen in Switzerland and Norway, whose governments have established rigorous obligations for e-waste such as making collection of waste materials more efficient and enforcing tighter obligations on producers to be responsible for the electronic waste of their products.
Noise pollution is an increasingly common issue. Anecdotal reports from barrios in Villarica suggest that residents are subject to consistent loud noises from mining operations. This phenomenon is caused by massive fans used to cool the computers, and in other global mining hubs has been linked to health issues, as per an investigation from TIME magazine.
What is the debate around employment?
Critics of mining point to the low numbers of people that are employed by mining companies, relative to the high energy usage. Compared with traditional Paraguayan industries such as textiles or mandioca processing, mining is seen by some to not contribute positively to local employment opportunities – which makes the high amount of energy used unjustifiable. According to data recently reported by the Institute for Social Security (IPS in Spanish), 2/3rds of mining companies in Paraguay don’t have formal employees, with only a total of 383 people formally employed in the industry.
Yet those working in the space suggest that employees are highly skilled and paid well above the average salary in Paraguay – with many jobs being taken up by young Paraguayan engineering graduates. Miners also point out that their operations have an indirect employment effect: civil and electric engineers, accountants and lawyers in local jurisdictions are often contracted to work with mining companies, and there is potential for economic clusters – a collection of services that support mining (e.g. hardware maintenance firms) – to grow.
What’s the bigger picture?
The key question that surfaces from the conversation on mining and its regulation is not a new one. Who benefits from the surplus energy Paraguay has from its hydroelectric sources ? Currently the mining sector does not feature in the nation’s industrial development or technology plan, despite being now one of the biggest consumers and beneficiaries of Paraguay’s energy.
Miners should offer more data on labour dynamics, provide transparency on environmental assessments, and facilitate more open participation in policymaking to help citizens understand what the contributions of this industry could be. To do this the debate needs to be localised more: currently the conversation is centred around nationalist narratives about what mining means for the future of the country, with little consideration on how communities outside of the capital, that are most impacted by mining, can contribute to regulation and policymaking on the topic.
1 ANDE (Administración Nacional de Electricidad) is a public, state-owned, company that manages and operates the country’s electricity transmission and distribution. It has a monopoly over electricity services in the country and controls the distribution from the main hydroelectric dams in Paraguay: Itaipu, Yaceryty and Acaray
2 Itaipu is the hydroelectric dam that Paraguay shares with Brazil. It is one of the largest dams in the world by energy capacity and contributes to approximately 86% of the electricity in the Paraguayan market
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