Paraguay’s Proposed Crypto Legislation May Be Counterproductive

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Paraguayan lawmakers are set to submit a bill aimed at regulating the country’s cryptospace and make it mandatory for bitcoin (BTC) linked businesses to register with the Undersecretariat of State Taxation, according to reports on July 14, 2021.

Carlos Rejala’s Crypto Regulation Push 

Paraguayan Congressman Carlos Rejala has joined forces with Senator Silva Facetti to formulate a crypto regulation bill. Sources close to the latest development have revealed that the bill aims to make it mandatory for crypto-related businesses to register with the Finance Ministry’s Undersecretariat of State Taxation.

The bill also aims to regulate bitcoin mining operations, crypto exchanges as well as peer-to-peer (P2P) crypto trading platforms, making it compulsory for market participants to register as “obligated subjects.”

“It’s important that companies can register these products within their accounting so that they can have their real valuation, additionally [it] helps to optimize the tax collection of this industry, finally giving traceability of what is produced in the country facilitating its tracking by supervisory authorities,” the document reads.

Good Intentions, Wrong Approach

While a section of the draft law states that its major objective is to foster regulatory clarity and legal certainty in Paraguay’s crypto industry, the bill has attracted serious criticisms from Paraguayan crypto advocates and observers.

One of the several talking points against the proposed legislation is its lack of inclusivity. Paraguayans have argued that the lawmakers have failed to carry crypto industry stakeholders along, as they did not seek feedback from key players in the country’s cryptospace.

In the same vein, other observers have argued that despite the fact Rejala and his colleagues have a genuine motive to put in place amenable regulations for Paraguay’s crypto ecosystem, their efforts may end up being counterproductive, as the bill doesn’t encourage innovation in any way or create economic development opportunities. Instead, it creates obstacles for market participants.

Though it’s still not clear whether the bill will get approved, crypto taxation is still a controversial topic in the industry. At a time when forward-thinking nations like El Salvador and others are creating tax-free havens for innovative businesses, Rejala’s bill may indeed be counterproductive, especially if the government decides to impose exorbitant taxes on crypto businesses.

Elsewhere, crypto advocacy group Project Mano has urged Ethiopia to put its abundant renewable energy resources to good use by engaging in extensive bitcoin mining operations which would significantly boost the country’s GDP and reduce its dependency on the fiat USD.

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