Paraguay Dismantles Two Illegal Bitcoin Mining Operations
Paraguay's Alto Paraná province has shut down two unlicensed Bitcoin mining sites within a week, seizing a total of 35 devices. The National Electricity Administration, National Police, and Prosecutor's Office conducted joint operations targeting illegal connections and resident complaints, not licensed industrial mining sites.
On September 17, the electricity bureau discovered a property in Minga Guazú connected directly to the public network without a meter, seizing 10 ASIC miners and charging for unmetered electricity, operational fees, and fines totaling approximately 176.16 million guaraníes (about $30,000) under Law No. 966/64. The prosecuting attorney is from the 9th Criminal Court of Ciudad del Este, case number 15144/26. The electricity bureau stated that such high-load illegal connections could overload transformers and damage distribution lines.
On September 12, police responded to noise complaints in the Remansito community of Ciudad del Este, entering homes with the electricity bureau and seizing 25 devices. The total of 35 devices is significantly smaller than the industrial mining sites connected to the grid in the country. The House of Representatives passed a resolution on September 16, requiring the electricity bureau to submit a report within 15 working days detailing the actual electricity usage, electricity prices, related income, and law enforcement situations for crypto mining sites, assessing their impact on grid stability and the economy.
Paraguay has long benefited from low electricity prices from the Itaipu hydroelectric plant. On the licensed side, operators like HIVE run at the hundred-megawatt level in areas like Yguazu and Valenzuela; in recent years, the electricity bureau has charged miners a special electricity rate and has previously handed over seized mining machines to partners for trial operations and early sales of output to hedge against electricity costs. Illegal sites draw electricity from residential or medium-voltage lines, effectively hiding industrial loads within residential electricity accounts, with fines calculated based on the number of days of electricity theft, not according to cryptocurrency prices.
The market mechanism is disrupted by law enforcement against electricity price arbitrage. Buyers are small miners seeking low-cost computing power; sellers are the grid and surrounding users who bear the costs of transformer overloads. Funds flow from "saved electricity costs" to fines and seized equipment. Beneficiaries are the electricity bureau and Congress, which need to understand the real load curve; those under pressure are the small workshops relying on illegal connections to maintain shutdown prices. The 35 machines do not change the overall network difficulty but provide real-world samples for electricity price hearings. The driving factors of the incident are electricity theft and noise, not changes in Bitcoin block rewards.
Source: Public Information
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The remaining electricity from Itaipu has made Paraguay a mining hotspot in South America: cheap electricity and quick grid connections have led Chinese and North American miners to ship entire containers of ASICs to the Ciudad del Este area. The electricity bureau later discovered that selling electricity to mining sites at residential or ordinary industrial rates effectively locked hydroelectric power that could have been exported to Brazil into hash rates, prompting the introduction of special electricity rates and investigations into illegal connections. Congress's request for a 15-day electricity report is aimed at turning the question of whether mining sites are benefiting from national hydroelectric subsidies into a voteable format.
Capital is divided into two layers. The upper layer consists of publicly traded companies like HIVE that acquire Bitfarms sites and expand capacity according to transformers, where electricity costs are included in expenses and cryptocurrency is reported in financial statements; the lower layer consists of the 10 and 25 device workshops that have zero electricity costs until they are caught. The electricity bureau's practice of testing seized mining machines and selling the mined coins in the long term turns law enforcement confiscated goods into hedging tools against electricity costs—the national electricity company is starting to think about output like a mining enterprise, just without holding coins. The $30,000 fine for the illegal electricity connection is relatively inexpensive compared to a new ASIC, with deterrence coming from equipment seizures and criminal liability, not from the fines themselves.
Comparisons can be drawn to the cleanup of residential mining operations in China, power restrictions after overloads in Kazakhstan, and illegal oil and electricity mining sites in Iran and Malaysia: low electricity price countries first attract hash rates, then discover that their distribution networks are not designed for sustained full loads. Licensed miners and illegal connection miners compete for the same hydroelectric power; when regulation increases prices, hash rates migrate; when regulation leads to meter readings, workshops disperse. The industry phase is shifting from expansion and installation to controlling electricity prices and grid connection qualifications.
Structurally, this belongs to a combination of regulatory changes and the transfer of pricing power. The mechanism is: Bitcoin pricing is determined by overall network difficulty, while Paraguayan miners' profits are determined by electricity prices minus fines; whoever can legally record industrial loads on electricity meters will remain; whoever hides loads in residential lines will socialize the risks of transformers. The report requested by Congress is to prepare the numerator and denominator for the next price adjustment.
ABAB News · Cognitive Law
Cheap is electricity, expensive is transformers
Saved electricity costs from illegal connections will turn into fines and equipment seizures
Whether the state sells electricity or hash rates will first be answered by the electricity price table