Next month, Paraguayan congressman Carlos Rejala plans to present a bill to attract international mining companies and other crypto businesses.
The project allows cryptocurrency companies — whether in mining or another segment, such as exchanges — to finance their Paraguayan operations with cryptocurrencies, remit dividends abroad and capitalize their cryptocurrency profits in local banks, Rejala told CoinDesk.
Rejala, a 36-year-old entrepreneur, discovered bitcoin in 2017 and began trading in 2019, a year after taking a deputy seat for the independent Hagamos party, he said.
On Monday, following the announcement that El Salvador would introduce a bill to allow bitcoin to be treated as legal tender, Rejala tweeted a photo of himself with laser eyes and a sentence about the project.
“The announcement prompted me not to be afraid and to think that this can be real in my country,” he said.
The project seeks to position Paraguay as the crypto hub for Latin America and a model for other countries in the region, he said, adding that if the bill is approved, he will seek to present a second one promoting the use of bitcoin as legal tender.
It’s been a longtime goal for local business leaders, who touted Paraguay’s cheap energy as far back as 2018.
“However, first we want to give Paraguay a blockchain-friendly status,” he said.
According to Rejala, one of the most attractive conditions for mining companies is the cost of electricity in Paraguay, which is around $0.05 per kilowatt-hour and is the lowest in the region. Almost 100% of production comes from hydroelectric sources.
“It is renewable energy, non-polluting, which is extremely important for the mining companies,” he said.
In a dialogue with First Mover on CoinDesk TV, Juanjo Benitez Rickmann, CEO of local mining company Bitcoin.com.py, said that mining in Paraguay only requires registration and payment of taxes, which he classified as lower than in the rest of the region. At present, the country has a system known as triple 10, which consists of 10% income tax, 10% VAT, and 10% personal income tax, Rejala added.
The country offers no restrictions on foreign capital flows and the payment of dividends abroad, Rejala added. “That also makes it an attractive country to crypto investors,” he said.
Paraguay does not use all the energy it produces, Rejala said. At the Itati hydroelectric plant, which Paraguay shares with Brazil, the country only takes 26% of the 6,067 megawatts it is entitled to monthly, submitting the rest to the neighboring country, he added.
“We have a lot of energy that we sell to Argentina and Brazil almost for free because we can only sell to our neighbors,” Benitez Rickmann said.
Next steps
A draft bill, supported by different players in the crypto sector, was presented to several Paraguayan government offices, such as the anti-money laundering office, Benitez Rickmann said.
Rejala is currently seeking to attract support to achieve the required majority of 41 votes in the chamber of deputies and pass the bill to the Senate chamber, he said. If approved in both chambers, it will then have to be enacted by the country’s President, who has the power to issue a veto.
During the Bitcoin 2021 conference held in Miami, Benitez Rickmann said he spoke to a number of mining pool operators from China who asked for 100 megawatts of space.
“Maybe it is an opportunity for us to get involved with them and develop,” he said.