Paraguay suffers from its toxic relationship with Bitcoin

The Paraguayan government has been simmering the Bitcoin industry. This does not mean that the cooking has been homogeneous; sometimes they turn up the heat as if they wanted to burn themselves down like Nero and expel all the companies who have invested in the country. Inconstancy is the enemy of business.

The history of Bitcoin in Paraguay, at least as reported in NoticiasVE, begins in 2018 with seizures of miners classified as irregular. Also, in that same year, Paraguayan businessmen spread the word about Paraguay’s potential to mine for its electrical surplus. Even in 2019, the National Electricity Administration (ANDE) publicly offered surplus electricity to foreign miners.

But The biggest twist came in 2021. When some deputies like Carlos Rejala promised to “bitcoinize” Paraguay in the style of El Salvador, the country became a magnet for miners and bitcoiners. After the massive expulsion of miners from China, Paraguay positioned itself as a promising destination thanks to the hydroelectric energy from the Itaipú and Yacyretá plants. Million-dollar investments arrived, including Bitfarms, and there was talk of making Bitcoin legal tender.

Everything seemed perfect: cheap electricity, a territorial tax system that doesn’t tax foreign income, and a government that, at least on paper, wanted to be friends with Bitcoin. But the dream never materialized. At least not with stable rules.

The bill that was to provide legal certainty was rich in fines and taxes. It was approved in Congress, vetoed by the president (who considered it a “transitory” activity), the veto rejected in the Senate… and finally archived due to lack of votes. There was no clear regulation.

The lack of regulation did not prevent authorities from convicting people of stealing electricity to mine bitcoin, with somewhat suspicious procedures. With the change of Executive in 2023 there was hope that things would improve for the Bitcoin industry. However, the lack of legal recognition continued to hinder basic needs such as access to bank accounts for miners.

In 2024 the situation was so ambivalent that, while a law was being promoted to prohibit mining, another proposal was circulating for Bitcoin to have «unlimited legal tender.» Later that same year, what was approved was to punish up to 10 years in prison for those who mined without the proper permits.

From then on, The hunt intensified, not without irregularities. Drones and thermal cameras to identify mining operations. Bitcoin equipment disappearing during seizures. Investigations of deputies for illegal mining. Criticism of the prosecutor’s office for not giving due process to the miners. Complicity of ANDE officials with illegal farms.

All this was happening while the Minister of Industry and Commerce recognized that Paraguay made more money selling electricity to miners than to Brazil. To safeguard the interests of the miners, the Paraguayan Chamber of Digital Asset Mining (Capamad) was born.

The government’s advance against the miners was not only against illegal miners. After a 16% increase in electricity rates, miners feared that the industry would die. Deputies described the increase as a theft from legal miners and Capamad projected losses of one and a half billion dollars in investment and thousands of jobs due to the measure. Indeed, more than 50 companies began to migrate to Argentina, Brazil and other countries, looking for «more serious destinations.»

Despite this context, mining giants continued to arrive in the country, such as Hive. The ones they were scaring away at that time were their local industry. For foreigners, as the economy minister said, the price of electricity was still not too high compared to the United States. For Hive, which carried out a million-dollar expansion in the country, Paraguay continued to offer incomparable facilities in the region for mining.

And, after pursuing miners, ANDE representatives now even attend digital asset conferences, claim that mining does not affect the country’s electricity supply, and even put confiscated miners to work. In this context, digital nomads and foreign companies continued to arrive to mine in the country, bringing Paraguay to the top 4 of the main global miners.

This is because, in addition to low electricity costs, there was something else that was attracting bitcoiners: the tax benefits of having a tax residence established in Paraguay. The country’s main attraction is its territorial tax system. This means that, with tax residency, the Paraguayan State does not tax income generated outside the country.

Thus, for example, digital nomads could establish a Limited Liability Company in the United States that would allow them to invoice global clients, and not pay taxes in Paraguay on that income. This is one of the conditions that are in danger today.

The National Tax Revenue Directorate (DNIT) has just published General Resolution No. 47/26: it obliges platforms and administrators to report each operation with Bitcoin and cryptocurrencies, including wallet addresses, networks used and hash of each transaction. Donations, inheritances and NFTs above $5,000 are also targeted. The agency already uses cryptocurrency accounting analysis tools to track private movements. The State wants to know everything.

At the same time, the Chamber of Deputies approved projects that require the Ministry of Industry and Commerce and ANDE to deliver in 15 days the complete registry of miners, authorized companies and authorized electrical connections.

The Paraguayan Blockchain Chamber warns what is coming: «All the contracts, according to what the government sends, are that they will close in 2027. They will not renew. Or if they renew, they will renew with fewer companies and at a different cost.» Ricardo Prieto Sosa, its director, sums it up: «Who do we give the energy to? To a miner or to a company that can create a thousand jobs?”

The result is predictable. If mining companies previously migrated en masse from Paraguay, now they have new reasons to do so. Hive and other large companies are still resisting because energy remains competitive, but the local industry—the one that really generates jobs and the ecosystem—is drowning. Digital nomads who arrived attracted by territorial tax residency now see that advantage evaporate under mandatory reporting that will soon become tax burdens.

Paraguay has everything to be a Bitcoin hub: electrical surplus, low cost and enviable geographical position. But your relationship with Bitcoin is exactly like a toxic couple: you seduce him, use him, punish him, and then complain when the other leaves.

Inconstancy not only scares away investment. It costs the country real income that could finance schools, hospitals or infrastructure without depending on external loans. Paraguay continues to simmer, turning up the heat every time a politician decides to do so and lowering it when he realizes the damage.

The Bitcoin industry does not ask for privileges. Ask for clear, stable and predictable rules. Paraguay still has time to choose: continue with this toxic relationship that leaves it with the crumbs of its own potential, or decide once and for all whether it wants to be a serious destination for Bitcoin or just another country that expelled the opportunity from its territory.