The Legislative Landscape of Cryptocurrencies in Paraguay Prior to 2024

Paraguay’s journey with cryptocurrency regulation has been a mix of cautious observation and progressive steps, reflecting a global trend in grappling with the novel challenges posed by digital currencies. The period leading up to 2023 saw significant developments that shaped the country’s legislative approach to this burgeoning sector.

Early Days and Regulatory Stance

For a substantial period, Paraguay maintained a hands-off approach towards cryptocurrencies. The Banco Central del Paraguay (BCP), the country’s central bank, clarified that the only legal tender was the Guarani, leaving virtual currencies without legal course or cancellation force. In a 2018 statement, the Director-General of Standards and Oversight at the Secretaría de la Lavado de Laundering y Bienes (Seprelad), Gregorio Mayor Oxilia, acknowledged the unregulated and risky nature of digital currencies but indicated that the state would not hinder the development of this technology. This statement was significant as it was the first official mention of cryptocurrencies in Paraguay. Despite this lack of formal regulation, cryptocurrencies began to find practical applications; in 2019, Paraguay settled an agricultural chemical export deal with Argentina using Bitcoin instead of the traditional SWIFT payment system​​.

Legislative Developments

The absence of regulation started to shift with the drafting of a bill that sought to regulate cryptocurrency mining and trading. Paraguay’s Senate passed this legislation in late 2021, marking a major step towards formal regulation. The bill then proceeded to the Chamber of Deputies, where it was approved by a vote of 40-12. The legislation aimed to attract international miners to Paraguay, leveraging the country’s low electricity rates, one of the lowest in Latin America. It required individual and corporate miners to request authorization for industrial electricity consumption and apply for a license. Additionally, a registry was proposed for those aiming to provide crypto trading or custody services. However, the concept of an exchange was not included in this proposal​​.

Economic and Social Implications

The introduction of this bill and the subsequent debate highlighted various economic and social implications. Proponents argued for setting ceilings on energy consumption in line with availability, considering the significant energy demands of cryptocurrency mining. Critics, on the other hand, raised concerns about the low job creation potential relative to the energy consumption by mining companies. The broader discussion also revolved around the use of the country’s electric energy and the need to develop a national plan that would address economic inequalities and consider the implications of large-scale cryptocurrency mining​​.

Summary

In summary, Paraguay’s approach to cryptocurrency regulation before 2024 was characterized by a gradual shift from non-intervention to active regulation. This shift was influenced by the need to provide investor guarantees, address energy concerns, and leverage economic opportunities. The legislative efforts reflected an understanding of the global trends in cryptocurrency and a desire to position Paraguay as an attractive destination for crypto miners, balanced with the need to safeguard national interests and resources.