Tether denies withdrawing from the 500 million dollar encryption project in Uruguay, debt disputes spark widespread discussion in Latin America.

Stablecoin giant Tether responded positively to local media reports, firmly denying claims of exiting Uruguay due to a power dispute. Despite facing nearly $5 million in a debt controversy, the company reaffirmed its long-term commitment to the region, sparking widespread discussion in the market about the prospects of cryptocurrency mining in Latin America.

The Truth Behind the Controversy Between Tether and the Uruguayan Electricity Company

Recently, local Uruguayan media Telemundo and Busqueda widely reported that Tether was forced to exit the country due to its failure to pay a debt of approximately 4.8 million USD. The reports indicated that the national power plant and the Electricity Transmission Management Authority (UTE) cut off power to its facilities due to Tether's failure to pay the 2 million USD electricity bill for May, leading the company to abandon its encryption mining operations in Uruguay.

“These reports are seriously inaccurate,” a Tether spokesperson said in an interview. “We not only have not withdrawn from Uruguay, but we are also actively assessing development opportunities in the region.”

Tether officially responded to these allegations on September 22, stating: “We will continue to evaluate the best development direction for Uruguay and the entire region. Although reports claim that Tether will withdraw from the area, these reports do not accurately reflect the actual situation.”

The company does acknowledge the existence of debt issues, stating that the local company operating the encryption mining facilities has been “engaging in ongoing discussions with the government to resolve the outstanding friction.” Tether emphasized: “We continue to support these efforts and the constructive way forward, which reflects our long-term commitment to sustainable development opportunities in the region.”

Uruguay's Energy Cost Challenge: Major Obstacles for Cryptocurrency Mining

Although Tether denies exiting Uruguay, local reports indicate that the controversy centers around the country's relatively high electricity costs. Uruguay's electricity prices are about $60 to $180 per megawatt-hour (MWh), which is considered high in the Latin American region, far exceeding the $22 per megawatt-hour in neighboring Paraguay.

“Energy costs are the most critical operational factor in cryptocurrency mining,” explained an industry analyst. “In an industry where electricity costs account for 80% of operating expenses, price differences can determine the life or death of a project.”

According to reports, Tether is negotiating with UTE for new facilities and is requesting a reduction in electricity prices, but the company has not commented on this. This negotiation strategy is not uncommon in encryption mining, as many companies seek to reach special agreements with local electricity suppliers to ensure sustainable operating costs.

Historical Lessons from Uruguay's Encryption Mining

Tether is not the first cryptocurrency company to face energy cost challenges in Uruguay. In 2018, the South American Bitcoin mining company Vici Mining relocated its facilities from Uruguay to Paraguay to take advantage of cheaper electricity costs.

Vici engineer Nicolás Ribeiro stated during an interview with Telemundo: “If you look at the global average electricity prices, Uruguay's electricity prices are far above the average level. Although starting a business in a new country is always challenging, when you examine this industry and realize that 80% of the operational costs come from electricity, it becomes a very important factor in deciding where to conduct business.”

Ribeiro believes that the dispute between Tether and UTE should serve as a “warning signal” for Uruguayan policymakers, prompting them to pay attention to the challenges of attracting and retaining energy-intensive industries.

“Uruguay needs to reassess its energy pricing strategy,” a local economist pointed out, “if the country wants to remain competitive in the digital economy, it must provide more attractive conditions for high-tech industries.”

Tether's Expansion Strategy in Latin America

Despite facing challenges in Uruguay, Tether's business continues to expand in other parts of Latin America. The company also operates Bitcoin mining facilities in Paraguay, taking advantage of the country's more economical electricity costs.

Tether announced the start of cryptocurrency mining in Uruguay in November 2023, with local media predicting that the investment amount for the joint venture could reach 500 million USD. An investment of this scale is significant for the Uruguayan economy, which may explain why both parties are still actively seeking solutions rather than completely terminating the collaboration.

“Tether's investment in Uruguay represents a part of the company's broader strategy in Latin America,” said an industry insider familiar with the company's operations. “Even in the face of short-term challenges, the long-term strategic value remains.”

The rapid adoption of stablecoins in Latin America

In stark contrast to the challenges faced by the mining industry, Tether's stablecoin USDT is gaining increasing adoption in the Latin American region. Recently, three automakers, Toyota, Yamaha, and BYD, have started accepting USDT for payments in Bolivia to cope with the country's shrinking dollar reserves.

In Colombia, Western Union's competitor MoneyGram announced that as the Colombian peso continues to weaken, its encryption payment application will provide locals with a solution for saving in USD stablecoin.

“Latin America is becoming a frontier market for stablecoin adoption,” explained a fintech expert, “in countries facing local currency depreciation and a shortage of dollars, stablecoins provide an effective tool for value preservation and cross-border payments.”

This trend indicates that, even in some regions facing operational challenges, Tether's overall business outlook in Latin America remains optimistic. The company appears to be adopting a diversification strategy, developing different types of business in various countries to adapt to the regulatory environment and economic conditions in each region.