AI Expansion Threatens Paraguay’s Bitcoin Mining Boom Despite $350 Million Annual Contribution

Paraguay’s bitcoin-mining industry is facing a major change in access to one of its most important resources: low-cost electricity. Contracts covering power supplied to miners at $44 per megawatt-hour are due to expire on Dec. 31, 2027, and the country’s state-owned utility has indicated that the deadline will not be extended.

The agreements account for electricity used by a group of mining operations representing roughly 4% of global bitcoin-mining activity. Together, those miners contribute about $350 million a year to Paraguay through their power purchases, making the sector a significant customer for the national utility. Yet the government is now preparing to direct some of that energy toward artificial-intelligence infrastructure, an industry viewed in many markets as a higher-value and more strategically important use of electricity.

The shift became clearer after the utility signed a 15-year agreement to supply an AI campus backed by Founders Fund. The deal places long-term computing infrastructure at the center of Paraguay’s energy strategy and raises questions about how much electricity will remain available for cryptocurrency mining once existing contracts reach their end date.

For bitcoin miners, the appeal of Paraguay has been straightforward. The country produces abundant hydroelectric power, creating access to relatively inexpensive electricity compared with many other locations where large-scale digital-asset mining takes place. Electricity is the central operating cost for miners, whose specialized machines run continuously to process transactions and compete for newly issued bitcoin. Even modest changes in power prices can determine whether a facility remains profitable.

The $44-per-megawatt-hour rate has helped make Paraguay attractive to mining companies seeking predictable energy costs. The arrangement has also allowed the country to monetize electricity generated by its large hydropower resources. Bitcoin miners can consume substantial amounts of power around the clock, providing a steady source of demand for a utility managing a large generation base.

That relationship now appears to be reaching a policy limit. The contracts’ expiration date gives the utility a defined point at which it can reconsider how electricity is allocated. By describing Dec. 31, 2027, as final, the utility is signaling that miners should not assume their current arrangements will automatically continue under the same terms.

The pressure on miners is not limited to the loss of a single supplier. Bitcoin mining has become increasingly competitive as operators worldwide invest in more efficient machines and seek locations with reliable, low-cost electricity. A facility that loses favorable power pricing may have difficulty remaining viable, particularly when it must also cover equipment, cooling, land, staffing and financing costs.

Artificial-intelligence data centers have intensified that competition. AI systems require large computing campuses filled with high-performance servers, and those facilities need dependable electricity as well as substantial supporting infrastructure. Unlike a short-term power purchase, a 15-year agreement can provide the foundation for a long-lived technology project, giving utilities and governments an incentive to prioritize such customers when planning future energy use.

The Founders Fund-backed campus is therefore more than a new electricity customer. Its contract represents a long-term commitment that could influence Paraguay’s broader industrial policy. The agreement suggests that authorities are weighing not only how much revenue a customer generates today, but also the type of economic activity they want to establish over the coming decades.

Bitcoin miners have often benefited from surplus renewable energy in countries with more generation than domestic consumers can absorb. Paraguay’s hydropower resources have made that model particularly attractive. But surplus power can become less available as new industrial users arrive, electricity demand grows or governments decide that some customers offer greater economic benefits than others.

The end of the mining contracts does not necessarily mean that all cryptocurrency operations will leave Paraguay immediately. Companies may continue operating until their agreements expire, negotiate different commercial terms or look for power from other sources. The future will depend on the utility’s next pricing decisions, the amount of electricity reserved for other industries and the cost of alternative power arrangements.

Still, the direction is significant. A country that became known as a destination for energy-intensive bitcoin mining is now preparing to place artificial intelligence at the center of at least part of its electricity strategy. The contrast reflects a wider competition among high-power industries for access to generation capacity that is cheap, stable and increasingly valuable.

For Paraguay, the AI agreement offers a chance to anchor a major technology project through a long-term power commitment. For miners, it sets a firm timetable for adapting to a market in which low-cost electricity can no longer be assumed. When the current contracts expire at the end of 2027, the balance between cryptocurrency mining and AI computing will provide a clear test of how the country intends to use its energy advantage.