In recent years, Venezuela has become a pioneer in the use of cryptocurrency. However, its economy has been hit by hyperinflation and recession. Despite this, the country has adopted cryptocurrency rapidly. Aside from its potential as a means to fight hyperinflation, it could also give Venezuelans a sense of freedom from the government.
Venezuela’s economy has been affected by recession and hyperinflation
Although hyperinflation and recession have affected the Venezuelan economy, it is showing signs of resiliency. As of March, inflation was at the lowest level in almost a decade, at 11.4 percent. In addition, the availability of hard currency has helped stabilize prices. As a result, analysts are expecting Venezuela’s economy to grow by 20 percent this year. This slowdown is due to an increase in hydrocarbon output and an increase in global oil prices.
The recent easing of foreign currency controls has helped ease shortages, but the lack of dollar currency has made goods expensive for Venezuela’s poor people. In addition, the US sanctions on the oil sector have prevented the government from investing in infrastructure. This lack of infrastructure investment is a contributing factor to the country’s problems.
As oil prices fell in 2014, Venezuela’s economy began to suffer. The government spent heavily when oil prices were over 200 dollars a barrel, but it was unable to spend during the free fall. By the end of 2014, oil prices were down to less than $30.
It is a rapid adopter of cryptocurrency
The adoption of cryptocurrency in Venezuela has skyrocketed in recent years. Many Venezuelans are moving away from the unstable bolivar, and cryptocurrency has been a welcomed alternative for them. However, the government wants to control the growth of the digital currency and has proposed a tax of 20% on bitcoin transactions. The draft bill was recently presented in the National Assembly, and it is aimed at curbing the growth of cryptocurrency.
As the bolivar plunged 1000% against the US dollar in less than a year, cryptocurrency became an attractive alternative. It is now accepted at over 20,000 businesses in the country, including a Burger King branch in Caracas. Using crypto makes it easier for local merchants to accept payments and is a more stable medium of exchange than the bolivar.
There are also numerous examples of cryptocurrency being used for humanitarian aid. Initiatives such as Bitcoin Venezuela and EatBCH are helping limit the suffering of thousands of people in the country. Through the use of cryptocurrency, these initiatives are able to provide food and other essentials to people in need. Using cryptocurrency, family members in Venezuela can send money directly to recipients and avoid expensive bank fees. Furthermore, many people living abroad are using cryptocurrency to donate to domestic non-profit organizations.
It could fight hyperinflation
Cryptocurrencies like bitcoin are gaining popularity in Venezuela, where the bolivar has become worthless due to hyperinflation. Venezuelans who work as freelancers have little or no bank accounts in other countries, so it makes no sense to accept payments in bolivars. Ricardo Carrasco, an IT engineer, is one such person who has opted to receive payments in bitcoins.
Since Maduro took office in 2013, Venezuela has been suffering from hyperinflation and massive macroeconomic imbalances. Maduro’s government has been unable to control inflation and has exacerbated it with excessive money printing. At present, 76 percent of Venezuelans live in poverty, and the social consequences are staggering. More than five million people have fled the country to escape the violence and insecurity.
Jimenez’s company, Valium, has developed a cryptocurrency to counter the inflation problem in Venezuela. While still in its Alpha stage, the company has already partnered with the Latin America food delivery app Rappi, which could provide a large user base for Valiu once it launches later this year. Crypto dollars are stored in a smartphone wallet app and can be sent among Venezuelan users without incurring fees. Since crypto dollars are backed by Bitcoin, users can buy them at one of the thousands of Colombian remittance partners.
It could give Venezuelans a measure of freedom from a government
The Venezuelan government has expressed interest in cryptocurrency and has tried a variety of experiments with it in the past year. One attempt involved allowing Venezuelans to pay for their passports with Bitcoin, but the effort was unsuccessful. Another attempt saw the government propose an anti-sanctions bill for September 2020, which would make it possible for Venezuelans to use cryptocurrency in business operations.
In early 2018, the Venezuelan vice president commandeered national television. Wearing a red tie and a blue suit, he appeared composed as he spoke about a historic moment in the country’s history: the introduction of a new cryptocurrency called Petro. He told the nation that the new digital currency would enable Venezuelans to become more independent of their government and free themselves from their financial shackles.
The OFAC has designated Venezuela’s government-sponsored cryptocurrency program as a foreign agent under Executive Order 13692. The agency has also issued General Licenses to transactions with the IV National Assembly, its staff, and other government officials.