29 July 2019, 18:07
2 min reading
As the Venezuelan government struggles to control what seems to be an unstoppable wave of hyperinflation, citizens are increasingly turning to Bitcoin and other digital currencies to protect their incomes and savings from the weakening Bolivar. Nicolas Maduro’s government has recently introduced a set of new banknotes for the second time this year with the
As the Venezuelan government struggles to control what seems to be an unstoppable wave of hyperinflation, citizens are increasingly turning to Bitcoin and other digital currencies to protect their incomes and savings from the weakening Bolivar.
Nicolas Maduro’s government has recently introduced a set of new banknotes for the second time this year with the intention to “make the payment system more efficient and facilitate commercial transactions”, the central bank wrote in a statement.
Last year, Maduro decided to cut five zeroes off Bolivar notes as a way to ease pressure on cash demand. Following the monetary overhaul, the highest denomination bill was 500 bolivars. But after reaching a peak inflation of 1.7 million percent earlier this year, the government is again adding two extra zeros to the notes: 10,000, 20,000 and 50,000 bolivars.
While the populist administration continues to point at the United States for ‘unfounded’ sanctions against PDVSA, its national oil company, production is running well below expectations. Venezuela, a member of the Organisation of Petroleum Exporting Countries (OPEC), remains heavily dependant on oil prices, which have fallen sharply in the last decade.
Venezuela was once among the richest countries in South America. Following the formation of a democratic government in the 1950s, the nation embarked in decades of prosperity thanks to rising oil prices and healthy governmental policies. Now, hopes for a better life don’t rely on expensive barrels or even democracy, but on Bitcoin — the go-to digital currency for millions of Venezuelans seeking refuge in alternatives to the national currency.
The International Monetary Fund estimates that hyperinflation in Venezuela could reach a whooping 10 million percent some time this year. Official data by the Finance Committee of the National Assembly of Venezuela reported a total 1,698,488.2% inflation rate for 2018.
Yet, numerous opposition leaders alert that the government is ‘cooking’ the figures and that the real situation is actually worse. The Bolivar has become so worthless already than people do not even count it when paying at physical stores, but weigh it instead.
The government is now focused on slowing down inflation. The thing is… anti-inflationary policies consists in reducing people’s purchasing power so much that they aren’t able to buy foreign currency in the black market, helping to stabilize the exchange rate and reducing demand for items in general to avoid further pressure on prices.
Venezuela isn’t the only country dealing with a strong devaluation of its national currency. Argentina, Turkey and Zimbabwe are also facing similar economic challenges.
With prices for basic goods growing over 300,000% in just a couple of months, migrating to a digital asset with an average quarterly fluctuation of 5.5% seems like a good idea.
Bitcoin and the rest of cryptocurrencies not only are more stable than the local Bolivar, but also guarantee no intervention or control by the authorities. In a country where people are not allowed to process transactions higher than 50 USD without reporting to a central authority, having a currency that lets you spend off the radar is highly appreciated.
Over three million Venezuelans have already abandoned their motherland in the last couple of years, fleeing to Argentina and Colombia in search for better life conditions. These migrants are also trusting digital money to send money back home as blockchain-based solutions offer commission-free and instant money transfers.
“When I moved from Argentina to Spain last year, I was looking for a service to send money back home quickly and without paying fees. At the time, my friend introduced me to Crypterium. Like most people, I was skeptical about cryptocurrencies. When I downloaded the Crypterium Wallet, I was shocked by its simplicity, flexibility and easiness to use. For example, I started to send money to my parents in Bitcoin using just their mobile phone number. They can either keep the money in Bitcoin or cash it out in seconds straight to their bank card,” says Matias La Porta Pascual, 31, Digital Transformation Specialist for SMB.
Moreover, the deep economic crisis in Venezuela prevents citizens from accessing reliable investment instruments. With Bitcoin, some people speculate with buy-and-hold strategies or actively trade it using profesional exchange services. That said, it’s also worth mentioning that the Caribbean nation has become one of the top destinations for cryptocurrency mining.
Buying cryptocurrency in Venezuela isn’t complicated, but it can be time-consuming and a bit expensive. Most Venezuelans use Localbitcoins to buy and sell cryptocurrencies. This platform connects buyers and sellers and it offers an escrow service to ensure that both parties fulfill their part of the deal. However, finding the right person isn’t always easy.
Solutions like Crypterium allow everyone to store, buy, cash out and exchange multiple cryptocurrencies in one single app. Moreover, it connects to the Crypterium Card — the first and only crypto card available in Venezuela and the entire LATAM.