In Venezuela’s economy, disrupted by hyperinflation and United States sanctions, cryptocurrency is a way to provide services and a tool to send remittances, protect wages from inflation and help businesses manage cash flow, Al Jazeera reported.
Cryptocurrency in Latin America has attracted attention again in June after El Salvador adopted Bitcoin as legal tender. Its popularity grows in Argentina as inflation ups.
Startup Chainalysis, which researches blockchain transactions worldwide, ranked Venezuela in third place on its Global Crypto Adoption Index, mostly for the massive Bolivar transactions.
Crypto mining is the easiest way to make additional income in the poor Latin American country, thanks to local extra-cheap power, but not many people can afford the mining equipment. Crypto is mostly used here to hedge inflation risk causing the traditional bank deposits to disappear in the weeks or even days.
Venezuelan workers who emigrated to Colombia use an app called Valiu to receive Colombian pesos from work and deposit the corresponding bolivars into a Venezuelan bank account.
Food delivery driver Pablo Toro has no direct connection to cryptocurrency, but indirectly he uses digital tokens every time he sends money to his family by platform Valiu.
Valiu uses pesos to buy cryptocurrency that it then sells on LocalBitcoins, a global peer-to-peer exchange for trading tokens in local currencies. It is more reliable than illegal money changers, the most usual channels for Venezuelan migrants to send money home.
“When the power is out in Venezuela, when internet service is down, it has a huge impact on how long it takes to send a remittance to one’s family,” said Toro, who quit working in a university because his monthly salary was not enough to even pay for food. And added: “Now I don’t have to worry about whether the cell signal dropped in Venezuela, or if cell service drops here.”
Alejandro Machado, Valiu’s head of pilot programs, said: “Valiu buys and sells Bitcoin instead of directly exchanging pesos to bolivars because of the lack of availability of that currency in regulated marketplaces.”
According to LocalBitcoins data analyzed by blockchain adviser UsefulTulips, Bolivar transactions on LocalBitcoins by value are the largest amid Latin American currencies.
By the words of traders and experts, cryptocurrency volumes on the site have declined because of the growing popularity of “stablecoins” on Binance, one of the largest cryptocurrency exchanges in the world. The stablecoin value remains steady against specific assets such as the US dollar, which avoids the volatility of other cryptocurrencies.
According to Binance spokesperson, Bolivar operations on the platform have grown by 75% since May, rising trading volumes despite Bitcoin prices dropped in May.
Fast foods and some supermarkets in Venezuela are accepting Bitcoin and Dash as payment now.
But as said economist and finance expert Aaron Olmos, a lion share of crypto operations in the country regard businesses swapping out of bolivars to avoid inflation. “Crypto is being used as a palliative for the economic situation, but you see it mostly among businesses,” he said. “Nobody is going to tell you ‘every night when we do the books, we convert bolivars into Bitcoin,’ but yes, this is happening.”