Venezuelans Escape Currency Collapse with Bitcoin
- Cryptocurrency Users Double in One Year
“Bitcoin adoption in Venezuela will explode any time now,” one early cryptocurrency adopter in the South American nation confidently predicts. Bitcoin experts argue that the worse an economy is, the more interest there is about the digital currency’s benefits — and Venezuela is a strong candidate for the next bitcoin boom.
Stringent controls on access to foreign currency and runaway inflation — last week saw a sudden jump in the unofficial dollar rate to Bs. 400 per dollar — have led to the number of Venezuela’s bitcoin users doubling since 2014, according to data provided by Bitcoin Venezuela.
A representative from the country’s leading bitcoin advocacy organization, who wished to remain anonymous, told the PanAm Post that they offer Venezuelans the chance to buy bitcoins online and thus escape the ever-increasing devaluation of the national currency.
The Venezuelan government enacted strict controls over foreign currency in February 2003 under late former President Hugo Chávez. Citizens looking to travel abroad or shop online are only allowed a limited amount of dollars (for the latter purpose, the government grants them just US$300 per year).
Bitcoin’s volatility is a well-known obstacle to widespread adoption, a fact recognized by the spokesman for Bitcoin Venezuela, but he argues that “the price never fluctuates at the same rate as the devaluation of the bolívar, which lost 60 percent of its value in one month.” As such, bitcoin can serve not only to transfer value, as in remittances, but also to store value.+
The bitcoiner community in Venezuela, gathered in a Facebook group with almost 4,000 members, speaks to the growing interest in the cryptocurrency. “The SurBitcoin exchange is already the second largest in transaction volume in Latin America after Brazil. The growth is evident,” the bitcoin advocate said.
Instead of viewing bitcoin as an enemy, the administration of President Nicolás Maduro should see it as an ally, he argued: “Bitcoin removes pressure on the exchange market, as thousands of people and firms need foreign currency.”2
A member of the Bitcoin Venezuela Facebook group who goes by the handle “Movi Ve” deplored the “brutal” depreciation of the national currency. Today, “the bolívar is just paper,” he wrote.
Bitcoin usage started around three years ago in Venezuela. Movi Ve explains that he makes enough to live on from transferring bitcoins. He says the cryptocurrency “is a lifeboat for Venezuelans” and is safer and faster than the black market for dollars, in which “scams are everywhere.”
“Bitcoin makes changing bolívares to dollars much easier and quicker,” he argued.
Mounting interest has prompted the community to organize a meet-up next week in an university in Maracaibo, Venezuela’s second-largest city. “I’ll be launching my website with information on bitcoin trading,” Movi Ve added.
According to coinmap.org, a website that tracks persons or businesses accepting bitcoin worldwide, there are 17 establishments in Venezuela that accept the digital currency: eight of which are in the capital, Caracas.
Venezuelan economist Luis Oliveros explained to the PanAm Post that the supply of foreign currency in Venezuela has plummeted while demand has continued to grow. As a result, Venezuelans “are running” to the black market to find dollars, he says.
The “Cadivi dollars,” Oliveros explains, were the government’s way of easing up on currency controls. “The Venezuelan government had to find a way to give people traveling abroad dollars. So they made the decision of granting Venezuelans an annual travel quota.”
With time, the Cadivi quota became smaller and smaller. Nowadays the figure varies depending on the travel destination and duration.
“The quota has always been fixed at a much lower rate [than the unofficial market]. This created incentives for many people to travel, and play the system,” because “those travelers who buy dollars at the official rate are being subsidized by those who stay.”