Venezuela's Embrace of Cryptocurrency
Venezuela is in dire economic straits. The brutal collapse of the country’s economy has led to rising crime and a scarcity of basic resources – including food and medicine – for its citizens.
The South American nation holds the largest reserves of crude oil in the world and was once awash with cash, but severe income inequality, corruption, increased oil supply from elsewhere around the globe, and international sanctions have minted a political crisis of epic proportions for President Nicolás Maduro and his administration. Amid the crisis, the country’s currency (called the bolívar) has been devalued to the point that inflation is in the quintuple digits.
Such hyperinflation has been a part of life for Venezuelans since 2014, leading its citizens to search for a viable means of exchange. The International Accounting Standards Board defines hyperinflation as a state in which "the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency,” but sanctions have left Venezuelans unable to obtain foreign currencies, including US dollars.
Enter cryptocurrency. Bitcoin, Dash, and other digital currencies offer significantly more reliable stores of value and mediums of exchange than the bolívar; they also provide a way around the control mechanisms of Maduro’s authoritarian government. The relative volatility of cryptocurrency is “still safer than the national currency,” a Venezuelan bitcoin trader told Reuters.
Inflation has kept the cryptocurrency-buying rate high, and trade volumes have remained robust as Venezuelans search for alternate means of exchange. Somewhat uniquely, Venezuelans have adopted altcoins at higher rates than elsewhere in the world, with Dash leading the way. Dash was introduced to the Caracas-based Cryptobuyer exchange in August 2016 and has been embraced to the point that Dash Core Group announced in August that Venezuela was the altcoin’s second-biggest market (after the United States).
While specific volume data for the country is difficult to come by, making it difficult to gauge Dash’s popularity relative to Bitcoin, the enthusiasm with which Dash has been adopted has been undeniable. Dash has been able to parlay tangible transaction fee- and confirmation time-advantages to the point that they claim (without providing comparative data) to be the preferred coin among Venezuelan merchants. 800 merchants in Venezuela accept the cryptocurrency, which is prized for usefulness in live and microtransactions. Dash Core Group has also made a concerted effort to drive Dash adoption throughout the country, raising awareness and running educational conferences.
As Venezuela’s political situation devolves, Bitcoin and Dash evangelists will continue to drive growth in an advantageous climate. Wider adoption across class lines appears likely, and with no end in sight for the capital controls driving hyperinflation, the country is set to continue developing a blueprint for nations in similar crises – crypto-driven solutions that provide citizens with a measure of hope in bleak economic times.
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