Paraguay’s rapidly growing crypto mining sector is currently under siege following the announcement by the nation’s energy authority, Administración Nacional de Electricidad (ANDE), of a substantial increase in electricity prices for legal mining activities.

The elevated tariffs, expected to come into effect on August 1, pose a severe threat to the sustainability of a significant portion of authorised crypto mining operations.

Jimmy Kim, the designated spokesperson for the Chamber of Digital Asset Mining (Capamad), expressed deep disappointment and concern over ANDE’s decision.

Kim highlighted the magnitude of the 16% price hike, especially considering the substantial 54% escalation in the previous year.

These escalating operational expenses could render legal crypto mining unviable in Paraguay, endangering thousands of jobs and substantial investments exceeding $1.5 billion in technological advancements and infrastructure.

Paraguay’s Senate early this month approved new legislation imposing severe penalties on individuals and companies involved in energy theft for cryptocurrency mining activities.

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Those found guilty of this offence now face up to ten years in prison. Other forms of energy theft will be met with a maximum of three years of imprisonment.

These harsh penalties target those who illegally tamper with electricity metres, bypass connections, or otherwise steal power. The law aims to deter cryptocurrency miners who have been accused of placing a significant strain on the country’s power grid.

Capamad, the representative body for authorised Bitcoin and altcoin miners in Paraguay, is actively seeking a review of the electricity price hike by the government.

While recognising the necessity of combating illegal crypto mining operations, Capamad argues that penalising legitimate operators will have severe adverse effects on the economy.

Kim emphasised that more than 50 legally operating firms have collectively injected over $700 million into the nation’s economy, constituting a significant foreign direct investment milestone.

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ANDE’s rationale for the price surge is centred on the need to safeguard the integrity of the electrical system, which has been compromised by illicit mining activities.

Alongside the tariff adjustment, the government has announced harsher penalties for electricity theft associated with unauthorised mining endeavours.

Nonetheless, Capamad is urgently requesting ANDE to reconsider the planned price increase to protect a crucial revenue stream for the nation’s economic stability.

With the deadline of August 1 looming, the fate of Paraguay’s legal crypto mining sector hangs in uncertainty. The implications of this decision will reverberate throughout the industry, influencing its sustainability and the broader economic contributions of these operations.