Originally published 2021-06-30.
In June 2021, days after El Salvador made Bitcoin legal tender, a Paraguayan lawmaker announced that his country would follow with its own Bitcoin bill. Headlines around the world reported that Paraguay was about to adopt the cryptocurrency as official money. It never did. Within weeks the congressman, Carlos Rejala, clarified that the bill would regulate crypto businesses rather than make Bitcoin legal tender, and the regulation that eventually passed Congress in 2022 was vetoed by the president. Here is what was actually proposed, why it attracted so much attention, and what happened afterwards.
What Paraguay actually proposed
Rejala, a member of the Chamber of Deputies, first hinted at a Bitcoin initiative on social media in June 2021, which led many crypto outlets to report a legal-tender plan. By 28 June he told Reuters that was not the idea. The bill, he said, was about effective regulation, describing it simply: "This is a bill on digital assets." He added that doing what El Salvador had done would be impossible in Paraguay, but that the country wanted to be friendly to the crypto industry.
The economist Steve Hanke, a vocal critic of El Salvador's experiment, praised Paraguay's regulatory approach. The text that was finally introduced in July 2021 by Senator Fernando Silva Facetti and others focused on crypto mining, trading, exchange, custody and related services.
Legal tender versus regulation: why the difference matters
The two ideas are often confused, but they are very different:
- Legal tender means a currency must, in principle, be accepted to settle debts and payments. El Salvador's 2021 law obliged businesses to accept Bitcoin alongside the US dollar.
- Regulation sets rules for crypto companies: registration, taxes, consumer protection, anti-money-laundering checks and, in Paraguay's case, electricity for mining. Bitcoin stays a private asset, and nobody is required to accept it.
Most countries that engage with crypto do the second. Only a handful have tried the first, and El Salvador remains the best-known example.
The El Salvador backdrop
El Salvador's Legislative Assembly approved its Bitcoin law in early June 2021 at the request of President Nayib Bukele, and it took effect on 7 September 2021. Supporters hoped it would cut the cost of remittances, the money Salvadorans abroad send home, which make up about a fifth of the country's economy, and attract investment and tourism.
International lenders were sceptical. The World Bank said it could not support the plan, pointing to environmental and transparency concerns. The International Monetary Fund warned that "adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis." Patrick Esteruelas of Emso Asset Management argued that for investors, El Salvador's prospects would depend far more on bringing its large budget deficit under control than on Bitcoin.
Those concerns proved lasting. In early 2025, as part of a loan agreement with the IMF, El Salvador amended the law so that businesses were no longer required to accept Bitcoin, effectively ending its status as compulsory legal tender.
A volatile asset to build a currency on
The timing of the Paraguayan announcement showed the risk. Bitcoin had hit a then record of around $64,000 in mid-April 2021, roughly £46,000, and by late June it had fallen to about half that, near £25,000. Some reports at the time placed that peak in 2020, but it came in April 2021. Prices have swung far higher and lower since. Such moves are exciting for traders but a serious problem for anything meant to price wages, rent and groceries.
Why Paraguay interested crypto miners
Paraguay's appeal to the industry had less to do with payments and more to do with power. The country shares two huge hydroelectric dams, Itaipú with Brazil and Yacyretá with Argentina, and generates far more clean electricity than it consumes, exporting much of the surplus. Cheap, renewable energy is exactly what Bitcoin miners look for.
Mining is the process in which specialised computers compete to validate Bitcoin transactions and earn newly created coins. It runs around the clock and uses large amounts of electricity, so miners move to wherever power is cheapest and most reliable. After China banned mining in mid-2021, many operators went looking for new homes, and Paraguay's surplus hydropower made it an obvious candidate. For the country, that raised a real policy question: should spare electricity be sold to miners at a discount, sold abroad to neighbours, or saved for future domestic industry? Lawmakers, the state utility and the central bank did not agree on the answer.
The bill that Congress eventually passed reflected this. It treated mining as an industrial activity and would have capped miners' electricity prices at 15% above the industrial tariff. The Chamber of Deputies approved it in May 2022 and the Senate gave final approval on 14 July 2022.
The 2022 veto and what it tells us
On 29 August 2022 President Mario Abdo Benítez vetoed the bill in full. The state electricity company, ANDE, had questioned whether the capped tariff would cover its costs, citing losses from illegal connections, and proposed that miners pay in advance in US dollars. The central bank had also raised concerns, including about power consumption. Silva Facetti argued the veto left an industry operating "in the regulatory shadows".
The episode offers some practical lessons for anyone reading crypto news:
- Check who is speaking. A single lawmaker's announcement is not government policy.
- Read what the bill says. "Bitcoin bill" can mean anything from mining rules to legal tender.
- Follow it through. Many proposals change shape or die in parliament, or, as here, at the president's desk.
Paraguay remains a hub for crypto mining thanks to its hydropower, but Bitcoin is not its legal currency. The guaraní still is.
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Sources: ForkLog: Paraguay clarifies Bitcoin legislation initiative (June 2021); The Block: Paraguay's president vetoes proposed crypto industry regulation (August 2022). World Bank, IMF and Emso quotes as first reported by Coin Gape.
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