Paraguays Chamber of Deputies approved the advancement of a crypto regulation bill to the Senate this week, despite pushback from the countrys central bank.
In a special session on May 25, deputies voted 40 to 12 in favor of moving the bill forward with modifications. The project will now return to Paraguays senate for further consideration.
The bill, first introduced in Paraguays Senate in July 2021, aims to regulate commercial activities relating to virtual assets. This would include licensing and supervising crypto mining companies operating in Paraguay. The proposed law does not involve making any cryptocurrency legal tender.
The purpose of this law is to regulate the production activities and commercialization of virtual or crypto assets, in order to guarantee legal, financial and fiscal security to the businesses derived from their production and commercialization, the bills first article states.
While the majority of deputies agreed to advance the bill, not everyone is excited about the prospect of Paraguay regulating the crypto sector. The countrys central bank (BCP) submitted a comment in March saying that, in its view, it is unclear whether the benefits Paraguay would receive from regulating the digital asset industry would outweigh cons like electricity consumption, loss of reputation and costs for the financial system, which would be significant.
Crypto assets do not fulfill the basic functions of money and constitute high-risk investments, the BCP wrote in its analysis. The intention to regulate the industry and commercialization of virtual assets, as intended in this bill, could generate a false sense of security regarding the holding of this type of asset.
The BCP reiterated this position just last week when central bankers were meeting in El Salvador to discuss financial inclusion. While many thought the event was primarily about bitcoin, the bank clarified that the meeting was not focused on cryptocurrencies and that it did not plan to discuss them at the event. The bank also reminded people that cryptocurrencies were not legal tender in Paraguay by linking to a statement it made in 2019 about their use.
Lawmakers discussed the bill at length before voting, raising concerns about issues such as electricity usage and money laundering. Deputy Basilio Nez, for example, claimed that the project will favor organized crime and raised concerns about El Salvadors use of bitcoin as legal tender.
But Carlos Rejala disagreed. Totally the opposite, he said, explaining that the law would be focused on the traceability of digital assets. He also underscored that the law would not make cryptocurrencies legal tender, but rather give oversight to the digital asset industry.
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