Venezuela: How Cryptocurrencies Transformed an Economic Crisis, Part 2

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This is the second part of the ‘ How Cryptocurrencies Transformed an Economic Crisis’ series by regular guest writer Eddie Mitchell. Eddie is a seasoned writer on all things Blockchain and crypto and we’re delighted that he has agreed to become a regular contributor to Rhetoriq.

For many advanced economies, it could be argued that cryptocurrencies are somewhat of a novel purchase or new-form of investment that has little real-world application. But under less than favorable economic conditions like Venezuela, cryptocurrencies appear to offer a lifeline as a store of value.

In part 1, we covered the value-depreciating effects of hyperinflation on the Venezuelan Bolivar (VEF), the increased adoption of cryptocurrencies, and the Petro, a cryptocurrency supposedly backed by oil, mineral and gold reserves, as well as having its value pegged to that of an oil barrel.

It brings to question how many Venezuelans are actively utilizing cryptocurrencies, are there any barriers preventing a more widespread adoption such as education and resources, and furthermore, are there any cryptocurrency related initiatives positively engaging the issue.

Store of Value

Cryptocurrencies are typically associated with volatility; this is a characteristic that the markets are infamous for, and more or less every cryptocurrency is subject to. For a nation steeped in economic decline, however, a financial asset that can both increase and decrease in value is better than one that appears to be in freefall.

A ‘stablecoin’ such as Tether (USDT) could be considered a better store of value, however, cryptocurrencies pegged to the value of a real-world asset or currency tend to have a long trail of questionable controversies behind them, which doesn’t particularly instill any notion of financial security. So why has the notoriously volatile bitcoin come out on top?

Perhaps it is a sign of the times, a modern marvel finally having its potential as a humanitarian tool realized. The use of crypto in Venezuela echoes the early cryptocurrency philosophies of financial sovereignty, as the cypherpunk roots find fertile land in troubled times.

Easy Buy

The act of purchasing bitcoin has been streamlined, previous entry barriers have been reduced by introducing simplicity to the buying and selling process. Over-the-Counter (OTC) platforms allow users to trade Peer-to-Peer (P2P), directly with others with numerous payment options including cash payments, deposits, and bank transfer.

graph indicating coin-dance-localbitcoins-VES-volume

The above graph supplied by Coin.Dance displays the explosive weekly increase of bolivars being traded for bitcoin on LocalBitcoins’ further data gathered by Coin.Dance shows that in August, Venezuela was ranked 4th in the “Localbitcoins All-Time Country Volume Leaderboard (USD)”.

Beating China and losing out to the USA, Russia and the UK, Venezuela with a population far smaller than its nearest competitors (32 million). These top five countries account for 72% of all Bitcoin trading, which by all metrics is now a necessity in Venezuela.

The seemingly disproportionate use of bitcoin in Venezuela raises further questions with regards to how many active users there are, how many merchants are accepting bitcoin or other cryptocurrencies, and just how such high transaction volumes have been achieved by a modestly sized nation.


It is estimated by the UN’s International Organization for Migrations (IOM) that around 2.6 million Venezuelans left the nation between 2017 and 2018. As a result, Venezuelan migrants have been sending remittances to their families, friends, charities, and businesses to help them cope.

Venezuelan financial consulting firm Ecoanalitica approximates that that $1.1 billion USD was sent back to Venezuela last year, and according to an interview conducted by bitGuru with a Venezuelan local, “Bitcoin is very much the currency of choice when sending money to their friends and family.”

The government isn’t particularly fond of this, and earlier this year ordered all banks to disclose all information pertaining to citizens who access their banking outside of the country.

According to a report from Bitcoin Magazine, state-approved trading houses are suggested to be in the pocket of the government, and the move to police and reroute remittances through such institutions is an attempt to scoop profit from remittance payments. Eduardo Gómez, a Venezuelan who is head of support at told Bitcoin Magazine: “A lot of people are sending money to their relatives in Venezuela and they want a cut of that.”

Grassroots Efforts

Cryptocurrencies have proven themselves to be censor-proof and have avoided government interference for the meantime. Taking advantage of this are small communities of educators, cryptocurrency exchanges, cryptocurrency firms, and charitable organizations who are striving for economic solidarity through the technology.

Bitcoin Venezuela is a non-profit organization that has focused on educating and promoting bitcoin technologies. At the helm of the operation is Randy Brito who in a Reddit Ask-Me-Anything (AMA) demonstrated the value of cryptocurrency donations, he writes:

“Today we help feed 2000+ people daily, by buying food for a soup kitchen where 1600+ people go to eat daily, probably the only meal they have in a whole day. Also cook meals for two orphanages, an elderly center, a kids hospital, and an old people’s hospital.”

In the post, Randy details his efforts and has set out a plan to further adoption through “hyperbitcoinization”, a term that describes the goals of his latest project called Locha.

Luckily for Venezuelans, he is not alone, there are several other considerable efforts being undertaken by a myriad of characters such as ex-Goldman Sachs software engineer, Jonathan Wheeler. He actually upped and left his position with the firm to launch his own non-profit, the Pale Blue Foundation (PBF), a humanitarian blockchain project with financial inclusion at its core, and is presently working on the creation of a Lightning Network-ready app to facilitate faster bitcoin donations on Venezuela.

Industry Assistance

Dash is a cryptocurrency that comes second to Bitcoin in terms of overall usage in Venezuela; it has found itself becoming highly practical for businesses as the cryptocurrency firm has proactively engaged communities and merchants to implement its services.

According to Dash Public Outreach Director Joël Valenzuela, Dash has been welcomed with open arms by vendors and merchants with around 500 domestic store owners now accepting dash.

In a bid to reduce timely and expensive cross-border remittance payments and avoid the corridors set in place by the government, Dash rolled out a major innovation called Dash Text. This allows users to send DASH tokens over a simple SMS text message without the need to a mobile phone, which is nothing short of genius.

Looking Ahead

Cryptocurrencies at present are providing a short-term solution for Venezuelans, the issue of hyperinflation will persist until the government has managed to curb international sanctions and get the economy back on track.

Venezuela could find itself being an economy reliant on cryptocurrencies entirely. Most recently, the contentious state-backed Petro token is now in a public sale phase and has failed to come through on its promise, with there being no evidence of the assets backing its value as well as an official website with no means to download a wallet or purchase Petro.

Whilst the circumstance is devastating for those experiencing it, the introduction of cryptocurrencies to Venezuela has proven to be a lifeline for many. Seemingly, Venezuelans cannot rely on their government for financial stability in fiat or crypto form, but instead must look to Bitcoin, Dash and the good deeds of those who are working independently to feed, shelter and assist those in need.


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