Here’s What You Need to Know About Paraguay’s Proposed Bitcoin Bill

Paraguay’s proposed Bitcoin bill would require mining licenses and establish investor protections – But not make Bitcoin legal tender.

Bitcoin Magazine’s Nik Hoffman had a WhatsApp conversation with Paraguayan Congressman Carlitos Rejala, in which the congressman shared the draft of a bill meant to regulate Bitcoin in Paraguay.

“With this we want to welcome the innovation of cryptocurrencies in Paraguay to the world,” Rejala said. “This is the result of a very strong and arduous teamwork of many experts in the field, both local and foreign,” he continued.

A translated version of the bill proposal (read below) refers to bitcoin and other cryptocurrencies as “virtual assets,” “cryptoactive,” and “cryptocurrency.”

This bill was eight pages long, filled with 22 articles, which was worked on in conjunction with Senator Silva Facetti. This bill is much longer than the bill El Salvador voted into law recently, recognizing bitcoin as legal tender, which didn’t include as many individual regulations.

Paraguay’s proposed bill suggests country’s legislators are seeking tight control over Bitcoin mining in the country, attempting to offer investor protection from bitcoin businesses and specifically indicating that bitcoin is not recognized as legal tender in the country.

The Bill Wants Bitcoin Mining Licenses

As mentioned in “Article 5,” a proposed virtual asset mining license, granted by the Powers of The Ministry of Industry And Trade (MIC), would be required for any entity mining bitcoin. “Article 10” goes into more detail, stating that those who want to mine bitcoin must “request the authorization of industrial electricity consumption.” Then after that has been obtained, they can then “request the authorization license for the industrial exploitation” for bitcoin mining.

*The proposed bill would require bitcoin miners to acquire a license to operate.*

Protection for Bitcoin Investors

“Article 11” states that those providing the sales of bitcoin are prohibited from “selling, assigning or transferring their property, giving as a loan or guarantee, or affecting the use and enjoyment of the Virtual Assets that they manage or guard for third parties without the express authorization of the owner.”

This would seemingly protect bitcoin investors whose private keys are in the possession of a business like an exchange or bank from having their bitcoin fractionally reserved or otherwise used without their consent.

Bitcoin As Property, Not Legal Tender

“Article 3” of the bill defines bitcoin as property, as it is defined in many other countries, reassuring that it can officially be bought, sold and licensed. And “Article 14” clarified that bitcoin would not be recognized as legal tender, stating that: “The Virtual Assets trading entities must inform the acquirer of the trading conditions with Virtual Assets, expressly notifying that the virtual assets are not recognized as legal tender, therefore, they are not backed by the Central Bank of Paraguay.”

Paraguay’s Translated Version of the Bill Proposal

National Congress

BILL

“REGULATING THE INDUSTRY AND MARKETING OF VIRTUAL ASSETS – CRIPTOACTIVOS ¨

CHAPTER I

GENERAL PROVISIONS

Article 1.-OBJECT. The purpose of this law is to regulate the activities of production and commercialization of virtual or cryptoactive assets, in order to guarantee legal, financial and fiscal security to the businesses derived from their production and commercialization.

Article 2.-SCOPE. This law is mandatory for any natural or legal person domiciled in the Republic of Paraguay who is engaged in the intermediation, commercialization, exchange, transfer or storage of cryptoactive virtual assets.

ARTICLE 3.- DEFINITIONS. For the purposes of this law, it will be understood by:

a) Virtual or Cryptoactive Asset: Any asset that exists in a digitized form or content that someone may possess, and therefore, they have an associated right to use it. Being treated as property, it can be sold, bought or licensed.

b) Token: Cryptographic token that represents a unit of value within a chain of blocks (blockchain), and that can be acquired in it in order to be used later to obtain goods of services.

c) Mining of Virtual Assets or Cryptoactive: Process of production of registration and validation of transactions in the network or block chain using the computing power of machines to solve mathematical algorithms that solve the blocks. For doing this work, you receive a reward in return, in the same type of Digital Assets.

e) Virtual Asset Service Providers: Individuals or legal entities that carry out mining activities or their equivalent, exchange, transfer, storage and / or management of virtual assets.

National Congress

f) Blockchain: It is a public registry composed of a distributed and decentralized database made up of blockchains, which uses cryptography to prevent the information registered in each block from being modified.

CHAPTER II

APPLICATION

AUTHORITY ARTICLE 4.- APPLICATION AUTHORITY. Establish as application authority the MINISTRY OF INDUSTRY AND COMMERCE, which will coordinate the activities of authorization, registration, supervision and control with the following Entities

a) NATIONAL SECURITIES COMMISSION: Which will be in charge of establishing the registration requirements and public offering of virtual assets, as well as the supervision and control of issuers, offerer, and intermediaries.

b) SECRETARIAT FOR THE PREVENTION OF MONEY OR PROPERTY LAUNDERING (SEPRELAD) within the framework of compliance with Law 1015/97 THAT PREVENTS AND REPRESENTS ILLICIT ACTS INTENDED FOR THE LEGITIMATION OF MONEY OR PROPERTY and its amendments, which incorporates the providers of virtual services as obligated subjects

c) NATIONAL ELECTRICITY ADMINISTRATION as a technical entity in charge of meeting the country’s electrical energy needs, promoting development, and preparing electrical development plans and programs.

ARTICLE 5.- POWERS OF THE MINISTRY OF INDUSTRY AND TRADE (MIC). The MIC shall have the following attributions:

a) Grant the Virtual Asset Mining License according to the requirements established in this law;

b) Supervise the activities of Virtual Asset Mining.

c) Register and control the proper functioning of computer machines whose only use is Virtual Asset Mining as a capital asset.

d) Promote technical training for electrical, civil and computer engineers in the generation of Virtual Assets;

National Congress

e) Sanction those natural or legal persons that carry out mining activities outside the regulatory framework of this law

ARTICLE 6.- POWERS OF THE NATIONAL SECURITIES COMMISSION (CNV). The National Securities Commission will have the following attributions:

a) It determines virtual assets that can be accepted for trading in the stock market.

b) It establishes the mechanisms of custody, annotation in account, intermediation, negotiation and compensation in the scope of the stock market.

c) Establishes registration requirements for intervening agents for negotiation, clearing, custody, and intermediation in the securities market. As well as the applicable periodic information regime.

The CNV will determine, by general regulations, the registration and monitoring fees, and the tariff limits for the services of the intervening agents within the securities market.

ARTICLE 7.- POWERS OF THE SECRETARIAT FOR THE PREVENTION OF LAUNDERING OF MONEY OR PROPERTY (SEPRELAD).

a) Establish the registration requirements of Virtual Asset Service Providers as obligated subjects in accordance with Law No. 1,015 / 97 THAT PREVENTS AND REPRESENTS ILLICIT ACTS INTENDED FOR THE LEGITIMATION OF MONEY OR GOODS and its amendments.

b) Establish monitoring and control mechanisms for transactions involving cryptocurrency virtual assets.

Punish those natural and legal persons who fail to comply with the registration obligation.

ARTICLE 8.- POWERS OF THE NATIONAL ELECTRICITY ADMINISTRATION (ANDE). ANDE will have the following attributions:

a) Establish the requirements of the industrial energy consumption plan for the virtual asset mining industry.

b) Establish bank, insurance or real effective guarantee requirements, which may not be less than the double value of monthly energy consumption

NationalCongress

Electricforeseen for those natural or legal persons who request approval of industrial consumption for the purposes of mining exploitation of virtual assets.

c) Approve and oversee the electrical infrastructure facilities used for the Digital Assets Industry.

ARTICLE 9.- RECOGNITION. Virtual asset mining is recognized as a digital, innovative and electro-intensive industry. This industry will be the beneficiary of all the incentive mechanisms provided in the national legislation.

Article 10 – VIRTUAL ASSETS MINING LICENSE. Individuals or legal entities who wish to carry out the virtual asset mining activity must previously request the authorization of industrial electricity consumption, the requirements of which will be established by ANDE.

Once the authorization for industrial electricity consumption has been obtained, the interested party will proceed to request the authorization license for the industrial exploitation of virtual asset mining, for which they must:

a) Comply with the registration and authorization requirements of the company

b) Georeferenced identification of the property where the industrial activity will be located. In case of being a tenant, you must have the express authorization of the owner of the property.

c) Industrial Plan, which must include the electrical and civil infrastructure project and financial plan according to the investment.

The Ministry of Industry and Commerce must be issued on the approval or rejection of the license application within a maximum period of 30 days after presenting all the technical requirements established in this law.

ARTICLE 11 .- ON THE COMMERCIALIZATION OF VIRTUAL ASSETS. Virtual Assets are free sale products by those individuals and legal entities who wish to market them, under the terms of this law. The Virtual Assets Service Providers will be prohibited from: selling, assigning or transferring their property, giving as a loan or guarantee, or affecting the use and enjoyment of the Virtual Assets that they manage or guard for third parties without the express authorization of the owner.

National Congress

ARTICLE 12 .- VIRTUAL ASSETS TRADING REGISTRY. Any natural or legal person with the intention of commercializing or guarding Virtual Assets for third parties has the obligation to register as Providers of Virtual Assets in SEPRELAD and will be considered obligated subjects.

ARTICLE 13.- RIGHTS DERIVED FROM THE TOKENS. The tokens can grant their holder:

a) Right to expectation of potential participation in the revaluation, profitability or obtaining a benefit from the investment project, which is called a utility token.

b) Right representing a share of the capital used for the development of the project, which is called a security token. In both cases, its holder will have the possibility of trading in markets equivalent or similar to the regulated securities markets.

ARTICLE 14.- DUTY OF INFORMATION. The Virtual Assets trading entities must inform the acquirer of the trading conditions with Virtual Assets, expressly notifying that the virtual assets are not recognized as legal tender, therefore, they are not backed by the Central Bank of Paraguay.

CHAPTER III

OFFENCES AND PENALTIES

ARTICLE 15.- INFRACTIONS AND SANCTIONS.physical or persons Jurídicas performing activities related to Virtual Assets Contravention of the provisions of this law and its regulations are subject to the corresponding administrative and criminal sanctions.

ARTICLE 16.- OF THE INFRACTIONS. Infringements are considered actions or omissions that result in the breach of obligations by any natural or legal person on whom the exercise or enjoyment of the rights of the employer, consumer and supplier depends, who due to their negligence, inexperience, recklessness or fraud negatively affect or jeopardize the exercise of

the National Congress

of rights recognized in the Constitution, ratified international conventions, the laws in force on the matter, the provisions established in this law and its regulations

ARTICLE 17. OF THE SANCTIONING AUTHORITIES. The sanctions for administrative infractions to the provisions established in this law will be imposed by the authorities that have disciplinary power.

The Executive Power shall establish by regulation a summary procedure, which guarantees compliance with the constitutional provisions relating to the right to defense, by which the Ministry of Industry and Commerce may impose the sanctions provided for in this law.

In the sphere of competence of the National Securities Commission, the agents involved in the securities market that violate this Law or the regulations issued by the National Securities Commission, will be subject to administrative sanctions, which will be applied based on the provided for in the Securities Market Law.

ARTICLE 18. SANCTIONS. The competent authority, within the scope of its jurisdiction, will impose the following sanctions on those natural or legal persons who contravene the obligations imposed in this law and its regulations:

a) Warning

b) Fine of up to 20,000 (fifteen thousand) Minimum Wages in force at the time of the imposition of the sanction, to be determined based on the annual registered turnover or the investment made when there is no invoicing, the sanction cannot be greater than 15% of the taxable base amount.

c) In the event of a recurrence of the same offense, the fine will be double the initial fine applied, which may be increased to 50,000 (fifty thousand) Minimum Wages in force at the time of the imposition of the sanction for the natural or legal person who register an annual turnover of more than G. 6,000,000,000 (six billion guaranies).

d) Suspension of the mining license or commercial activities related to virtual assets for a term of 6 (six) months; in the act of suspension, the corrective measures to be adopted will be indicated.

National Congress

e) Temporary closure of the establishment or temporary suspension of activities related to mining or commercialization of virtual assets.

f) Once the suspension term has elapsed without the corrective measures ordered by the control authority having been adopted, the definitive and immediate cancellation of the mining license or the commercialization of virtual assets will be ordered.

The administrative sanctions are independent of the corrective or precautionary measures dictated by the enforcement authorities to safeguard the protected public interest.The

applicable sanctions for those who exercise a public function will be applied in accordance with the laws that establish the disciplinary regime of the institution of which the civil servant perform functions.

The sanctions may be applied jointly or separately according to the severity of the offense. The amounts collected as a fine will be intended exclusively for the strengthening of the sanctioning body.

ARTICLE 19. GRADUATION OF SANCTIONS. To set the amount of the fines and selection of the type of sanction, the following criteria:

a) The magnitude of the economic damage;

b) The repetition or recidivism in the commission of infractions; c) The negligence or intentionality of the offending natural or legal person.

CHAPTER IV

TRANSITIONAL PROVISIONS AND FINAL PROVISIONS

ARTICLE 20. REGULARIZATION OF MINING COMPANIES. Natural or legal persons that operate as mining companies must apply for the relevant license within a maximum period of 180 (one hundred and eighty) days from the entry into force of this Law and its regulations under penalty of a fine and definitive closure of the establishment.