Will Bitcoin soon be an official means of payment in Paraguay?

This month, Paraguayan lawmakers have already taken a close look at cryptocurrencies and Bitcoin mining in Paraguay and submitted several draft laws. The proposals include a ban on Bitcoin mining and cryptocurrencies on the one hand, and proposals to support the mining industry on the other.

Congressman Derlis M. Rodríguez has also submitted a bill to regulate virtual currencies, create a national digital currency and regulate digital assets. According to media reports, this also includes the plan to allow Bitcoin as an "experimental legal tender".

The idea of introducing Bitcoin as a means of payment is not new in Paraguay. At the end of 2021, after El Salvador became the first country to officially introduce Bitcoin as a means of payment, the Paraguayan minority party HAGAMOS submitted a corresponding legislative proposal - Blocktrainer reported. However, the law was not implemented.

This time, however, the bill comes from MP Derlis M. Rodríguez, who belongs to the long-standing ruling party, the National Republican Association (Asociación Nacional Republicana, ANR). The draft with the long title "On the general regulation of the virtual currency unit, its interaction and integration with the national physical currency and crypto-assets in the territory of the Republic" was submitted to the president of the lower house, Raúl Latorre. However, the text of the bill does not yet appear to be available online. The information on the draft comes from official reporting by the Chamber of Deputies and other local media.

One aim of the law is to create the legal, economic, administrative and commercial basis to make crypto-assets an official virtual currency unit in the country. Numerous national users are already working with the "financial phenomenon" of cryptocurrencies.

Cryptocurrencies or virtual currencies are no longer a matter of futuristic banking, but a financial and economic reality based in the present. We cannot stay behind and must become protagonists of this digital revolution.
_{Excerpt from the explanatory statement}

It ultimately becomes clear that the creation of a legal basis for the recognition of cryptocurrencies as an official monetary unit does not relate exclusively to Bitcoin.

The bill consists of 60 articles proposing that any cryptocurrency used in the virtual space can circulate, interact and be integrated in the Republic as a digital medium of exchange, payment and reversal, with strong cryptography that secures transactions, controls the creation of additional units and verifies the transfer of assets using distributed ledger technology and is accepted in the global economy.
_{Excerpt of the report by the news portal ABC}

One advantage of this potential law would be the ability to transfer funds immediately worldwide and directly to any other user without the need to involve a bank.

Although the draft law also mentions the risks associated with cryptocurrencies (e.g. volatility and fraud), Rodríguez emphasizes Paraguay's advantages over other nations, which could give the country a unique role in the crypto industry. In particular, Rodríguez refers to the clean and inexpensive (surplus) energy from the binational hydroelectric power plants of Itaipú and Yacyretá. These natural resources represent an immense potential for the country, as they make it possible to achieve very low electricity prices, which could turn Paraguay into an important player in the mining industry. Accordingly, the right framework conditions that offer mining plant operators security and high profitability would attract a great deal of capital to Paraguay.

The Paraguayan central bank, ministries and other public institutions are also to be involved. This primarily concerns the process of creating and issuing a national cryptocurrency (CBDC) as well as combating crime in the form of money laundering and tax evasion. Details of this have not yet been made public. It is therefore also difficult to say whether this will result in regulatory disadvantages. However, it could be assumed that the project for a separate digital central bank currency is more likely to result in extensive surveillance and possibly censorship of citizens.

Now that the bill has been introduced to the Chamber of Deputies, it is being examined by various committees. These include the committees for economy and finance, industry, trade, tourism, combating drug trafficking, science, technology and energy. If the bill is approved, Paraguay could become the second country after El Salvador to recognize Bitcoin - and in this case other cryptocurrencies as well - as legal tender.