In a bold move that could redefine the role of government in cryptocurrency, Paraguay’s state-owned electricity monopoly, Administración Nacional de Electricidad (ANDE), has signed a Memorandum of Understanding (MOU) with tech firm Morphware. The agreement sets the stage for a government-led Bitcoin mining program that aims to utilize thousands of seized mining machines and surplus hydroelectric power.
The deal positions Morphware as a technical and advisory partner for regulated Bitcoin mining operations in Paraguay. At the heart of this collaboration is a stockpile of approximately 30,000 Bitcoin miners that Paraguayan authorities have confiscated from illegal operations across the country. According to Morphware founder and CEO Kenso Trabing, these machines are currently stored in government warehouses, stacked to the ceiling and unused.
A Solution to a Growing Problem
Paraguay has become a popular destination for Bitcoin miners due to its abundant and low-cost hydroelectric power, much of which is generated by the Itaipu Dam and exported to Brazil. However, this influx has also led to widespread electricity abuse, with many operators tapping into the grid illegally or misclassifying their activities to avoid industrial tariffs.
The government’s enforcement actions have resulted in large-scale seizures, but the challenge has been what to do with the confiscated equipment. Morphware’s proposal, now formalized in the MOU, is to redeploy these seized miners at utility-controlled sites near substations. Under the arrangement, ANDE will retain ownership and oversight, while Morphware will provide training, operational guidance, and technical expertise.
Transforming Warehouses into Mining Facilities
Trabing explained that the plan involves converting existing utility buildings into basic mining facilities. Many of these structures are already located next to substations and can be retrofitted by removing walls, installing ventilation, and adding transformers, distribution units, and metering equipment. The goal is to turn stranded or underused electricity into a new source of revenue for the state utility.
Electricity in Paraguay is a politically sensitive issue, with different tariff regimes for households, favored industries, and mature sectors. Bitcoin mining falls into a higher-rate category, but illegal operators often attempt to bypass these costs. By running mining operations directly through ANDE-controlled infrastructure, the government can enforce compliance while capturing the economic benefits.
The Future of Bitcoin Mining in Paraguay
A key question remains: what will Paraguay do with the Bitcoin it produces? Trabing noted that there are active debates within government agencies. Some officials support selling Bitcoin immediately to fund public programs such as social security, education, and infrastructure. Others have proposed holding some Bitcoin or managing price risk through financial markets.
Morphware has advised a conservative approach centered on derivatives, suggesting the sale of BTC futures on U.S. exchanges to hedge production and stabilize revenue. The company has also warned against allowing government agencies to custody Bitcoin directly, citing Paraguay’s history of cybersecurity breaches.
The MOU marks a significant shift in how Paraguay views its electricity exports. The country generates far more power than it consumes and sells the excess abroad at relatively low rates. Mining offers a way to monetize excess energy domestically without waiting for traditional industrial demand to materialize.
Looking Ahead
The initial phase of the project will focus on deploying seized miners and training ANDE staff on mining operations, grid integration, and basic Bitcoin concepts. If successful, the model could expand, with Paraguay financing new mining equipment using structured financial products tied to future Bitcoin production.
This innovative approach could set a precedent for other countries with surplus renewable energy, demonstrating how governments can leverage seized assets and underutilized resources to create new economic opportunities. As Trabing puts it, “This is what the future of midstream electricity looks like: grids that don’t just deliver power, but own a stake in the digital infrastructure they enable.”
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