After El Salvador, Paraguay considers Bitcoin adoption

After El Salvador, Paraguay considers Bitcoin adoption
  • The announcement from Paraguay comes days after El Salvador announced plans to accept Bitcoin as legal tender.
  • Large mining farms in China have been forced to consider alternatives after the country’s recent crackdowns.
  • Cooler countries will be preferred for crypto mining.
South American country Paraguay has become the second country to consider regulations that will be favourable towards the crypto business this week. First reported by Coindesk, Carlos Rejala, a Paraguayan Congressman is set to present a bill that will set favourable regulations for crypto mining and crypto exchange businesses that want to set up shop in the country.

36-year old Rejala had supported such regulations earlier in the week, after the El Salvador government announced plans to accept Bitcoin as legal tender in the country. “As I was saying a long time ago, our country needs to advance hand in hand with the new generation. The moment has come, our moment. This week we start with an important project to innovate Paraguay in front of the world!” Rejala said in a tweet on June 7 (translated from Spanish).

According to Coindesk, the Congressman has followed Bitcoin since 2017 and had also started trading in crypto in 2019. “The announcement prompted me not to be afraid and to think that this can be real in my country,” he told the publication, about introducing a bill in his own country after El Salvador announced its plans.

Like El Salvador, Rejala plans to push for Bitcoin to be accepted as legal tender if the first bill is accepted.

Why are El Salvador and Paraguay looking to make the moves now?

Paraguay and El Salvador have picked the right time to announce their intentions for the crypto industry. The boom in the crypto market has not only created room for new traders but also more crypto miners. The rationale is simple, more trading means more transactions, which means more miners, because they’re the ones who authenticate the transactions.

China’s recent crackdown on crypto mining is forcing big mining farms to look for new locations where they can set up their business. For instance, two of the largest crypto miners in the world — Huobi and BTC.TOP — announced last month that they’re looking for options elsewhere.

“In the long term, nearly all of Chinese crypto mining rigs will be sold overseas, as Chinese regulators crack down on mining at home,” Jiang Zhuoer, the founder of BTC.TOP, wrote on the Chinese social media platform Weibo.

BTC.TOP is a crypto mining pool, a common occurrence in the industry where multiple miners combine their resources to make one big mining operation. Hashcow, which runs 10 mining farms in China, had also announced that it will stop operations in the country.

China accounts for over 70% of all Bitcoin mining in the world, and one of the reasons for this was cheap energy. If Paraguay and El Salvador can promise companies the same, they could really capitalize on this situation. According to a project by the University of Cambridge, called the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining consumes about 112.57 terawatt-hours of energy every year, which is more than the total electricity consumption of some countries.

Seeking crypto business

But El Salvador and Paraguay aren’t the only countries that are vying for a piece of the crypto pie. In fact, Argentina has seen a boom in crypto mining recently, on the back of cheap availability of electricity.

The fact that the crypto mining process consumes a lot of energy is no secret, and much of this is required just to cool down the farms. As a result, many companies are considering moving to cooler countries too. For example, the United States’ Miami could be one of the future options.

The global cryptocurrency mining hardware market is expected to grow to $2.8 billion by 2024, at a compounded annual growth rate (CAGR) of 7%, so there is room for more than one country to capitalize though.

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