Numerous Bitcoin miners have had to shut down operations due to new laws in China. Could Paraguay reinvent itself as a bitcoin mining hub?
The announcement is the latest in China's long-running friction with the cryptocurrency industry. But this time it looks like the commercial operations, more specifically the miners, are feeling the pressure and want to move elsewhere.
The press release specifically mentions: bitcoin mining and bitcoin trading will be punished as part of "financial risk control". The wording:
"Push for reform of small and medium-sized financial institutions, focus on reducing credit risk, strengthen supervision of the financial activities of platform companies, crack down on bitcoin mining and trading behaviour, and resolutely prevent the transfer of individual risk to the social sector."
With Latin American countries opening up to Bitcoin - could there be a spatial shift in the Bitcoin mining infrastructure?
Bitcoin mining hash rate plummets
According to Reuters, China's crypto crackdown has already made its way to the western province of Sichuan: Authorities there have ordered the closure of bitcoin mining operations in the region.
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The Sichuan Provincial Development and Reform Commission and the Sichuan Energy Bureau issued a joint notice, dated Friday and seen by Reuters, calling for the closure of 26 suspected cryptocurrency mining projects by Sunday."
Electricity companies in the region were reportedly ordered to stop supplying electricity to mining companies.
Bitcoin's hash rate saw a sharp decline shortly after the announcement. It reached an all-time high of about 180 million TH/s in mid-April. But since then, the latest data shows, the hash rate has fallen to the November 2020 level of about 125 million TH/s.
The hash rate is a measure of the processing power of the Bitcoin network. The higher the hash rate, the more secure the network. Some also see the hash rate as a measure of the health of the network.
Will Paraguay fill the gap?
In an attempt to attract miners, the US has offered up Texas and Florida (Miami) as possible locations.
But with a flood of Latin American countries joining the Bitcoin revolution, could Chinese mining companies prefer the lower costs and abundant renewable energy sources in countries like Paraguay?
In recent weeks, several Latin American countries, including Paraguay, have signalled their intention to follow El Salvador in formally recognising Bitcoin.
Paraguay is home to the Itaipu Hydroelectric Dam (IHD), located on the border with Brazil. The IHD is the second largest hydroelectric dam in the world - with a capacity of 14 gigawatts. It supplies Paraguay with 90% of its electricity needs and 15% of Brazil's needs.
Although Paraguay's national deputy Carlitos Rejala continues to keep his specific Bitcoin (and PayPal) plans under wraps, given the importance of the IHD to the country, it's almost a given that he will play a role in Paraguay's Bitcoin revolution.
Rejala will present the Bitcoin legislation to the national congress for discussion in July.
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