BitcoinNews began following the situation in Venezuela early last year and tagged it as a potential humanitarian disaster. Where does Venezuela turn to now as it sits on the cusp of a complete breakdown of its political system and economy whilst facing the challenge of a new era of government?
Bitcoin, albeit driven underground by the Maduro regime, has been supporting many of those nationals choosing to remain in the country rather than fleeing to neighboring Columbia in order to escape poverty. Many have found solace in Bitcoin and Dash which may have at least to this point delivered what they promised.
However, Petro – the national crypto brainwave of Nicholas Maduro- which was introduced in December 2017 as a solution to the country’s ever-deepening national crisis has failed. The Venezuelan crisis was started by the much-adored Hugo Chavez 1999 with radical social programmes which eventually bankrupted the country. Backed by tangible assets like gold, oil, and diamonds Maduro tried to convince a nation of a solution which was ill planned. It is no accident that the introduction of the Petro came at a time when Bitcoin prices were soaring.
Many Venezuelans, turned on by the hype of Bitcoin through the media, and then its actual applications – its “real-life” workability when they could lay their hands on it, were equally turned off by the near-invisible and highly impractical Petro. This was made even more ludicrous by the arrival of “Petro Gold”, each one backed by a barrel of oil, which took using cryptocurrency as a fix to an economic disaster into the realms of the theatre of the absurd.
Now, Venezuela’s economy has shrunk in half within five years, and it’s hyperinflated, unsupported by oil output which has fallen by almost two thirds since 1999. To worsen the situation, the country has had to deal with US sanctions, which also ensured that no Americans could own the Petro or Petro gold cryptocurrencies.
Chavez inherited an oil boom and squandered it. Maduro, faced with the challenge of addressing an economic meltdown, introduced a national cryptocurrency and mismanaged it. This begs the question, can a proven cryptocurrency such as Bitcoin find a place in Venezuela’s economy should Maduro go, given that Venezuelan’s may now have little stomach left for cryptocurrency after the Petro fiasco.
Many Venezuelans may have observed that Bitcoin has at least proven itself as an alternative to the worthless Bolivar and the almost unobtainable US dollar during the turmoil of Maduro’s term as President. Juan Guaidó, the country’s President of the National Assembly-come interim unofficial replacement for the still incumbent Maduro, will give some encouragement to nationals. In August 2014, he announced the launch of Bitcoin exchange Plataforma Sur Bitcoin, the first exchange allowing Venezuelans to buy Bitcoin using Bolivars at a time when they still had value. Guaidó would almost certainly write off the Petro as the failure that it is and look for other options for the much-devalued Bolivar as he has long been the national cryptocurrency’s greatest critic.
If Guaidó is to promote the use of Bitcoin on the streets of Venezuela he has a real challenge ahead in terms of logistics, infrastructure and changing the thinking of a whole nation. Data released by the country’s national telecom providers shows that there are only 11.9 million mobile devices in Venezuela, a country with a population of 30 million people.
Currency controls mean that this number is dropping even further because no one is importing smartphones into the country to sell so that the devices in circulation are often unbranded or not up to date. Some cities are completely disconnected from any communication system, some going without access to calls, SMS, text, 3G or even cable internet with no connection beyond city limits.
Educating Venezuelans on the actual applications of cryptocurrencies in the wake of the Petro will be another challenge if Bitcoin is to find a place. There have been some inroads into this of late, with non-profit blockchain firm Cripto Conserje and US company Horizen (formerly ZenCash) collaborating to create an education program for refugees fleeing the country to neighboring Columbia. Cripto Conserje’s Alpha Project has been set up to increase cryptocurrency adoption in Latin America, especially in the border town of Cucuta, and is hoping to encourage more Venezuelans to turn to crypto, as spokesman for the project commented:
“Together we are providing ZEN paper wallets and education to those in need, ensuring they have secure ways to access and control their money no matter where they are and what situation they are in…We are also onboarding 100 local merchants to begin accepting ZEN as payments.”
With over 2 million refugees crossing into Columbia since the economic crisis began, cryptocurrencies such as Bitcoin and Dash have been Venezuelans only viable and usable method of purchasing daily necessities. The US dollar is hard to come by; although, in November of 2018 a hyperinflation expert Steve Hanke teamed up with Mexico City-based blockchain powered currency platform AirTM in order to get financial aid into the country via an airdrop. Hanke, also a professor of applied economics at Johns Hopkins University launched “AirdropVenezuela” in order to raise cryptocurrency donations up to USD 1 million.
US-based cryptocurrency exchanges have been offering limited support to beleaguered nationals, but every effort of this kind has significant PR value as it proves to Venezuelans that well-managed cryptocurrencies have the capability of changing the well-being of recipients. Although many might argue that this on its own is not enough, Coinbase donated USD 10,000 in ZCash (ZEC) during Christmas period in 2018 through GiveCrypto.org, a non-profit organization that distributes cryptocurrency to people living in poverty. The funds were donated to the wallets of over 100 families living in the Venezuelan border town of Santa Elana de Uairen, located in Bolívar state near the border with Brazil and Guyana.
All such experiences illustrate clearly that cryptocurrencies, used in an innovative way, can help address Venezuela’s current decimated economy and can in fact change lives for the better, but as yet, Bitcoin and other major digital currencies have only just scratched the surface.
Many now wait to see if a new regime is possible and if Maduro bends to international pressure and gives way to a self-elected new President. If Guaidó does inherit the great challenge of tackling Venezuela’s massive economic problems, it remains to be seen if he also selects the challenge of choosing Bitcoin as one of many tools available to begin rebuilding an economy decimated by two successive leaders.
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