The government of Venezuela has banned the importation of cryptocurrency mining equipment, including graphics processing units (GPUs) and application-specific integrated circuits (ASICs). The law changes were made in April and since then customs has been seizing cryptocurrency mining equipment at seaports and airports.

Carlos Vegas, the Superintendent of Cryptoactives and Other Related Venezuelan Activities, has implied that this ban is only temporary, saying companies are being evaluated and will eventually be authorized to import, market, and guarantee the quality of cryptocurrency mining equipment in Venezuela. He warned Venezuelans to be prudent when acquiring cryptocurrency mining equipment since no company has been endorsed or certified by the Venezuelan government to distribute such equipment.

The reality is that this ban is coming at a time when Venezuelans have been embracing cryptocurrency and could be a measure to slow down the replacement of the local fiat currency, the Bolivar Fuerte (VEF), with cryptocurrency.

The VEF has been experiencing extreme hyperinflation at the rate of thousands of percentages per year, leading to currency being used as confetti at baseball games and needing literal suitcases full of cash to go grocery shopping. The VEF has lost over 99.99% of its value, so anyone that had their life savings in it is now in living poverty, and the inflation rate is so high that anyone paid with VEF will be earning progressively less.

As a measure to try and fix the crisis the government is cutting off three zeros from the VEF, so VEF 1,000 will become VEF 1, but this isn’t much of a fix since the high inflation rate will continue due to sustained money printing by the government.

The government of Venezuela fixed the cost of utilities including electricity, water, and phone bills at about VEF 300,000 VEF, which is roughly USD 3 per month. This means that electricity in Venezuela is essentially free, and this has led to a cryptocurrency mining boom. Once a cryptocurrency mining rig is purchased, there is little electricity cost, so anything it produces can be used to purchase goods, services, or for savings. Best of all, the earnings can be kept in Bitcoin, a more stable currency which becomes more valuable versus the VEF every day.

The end result is that anyone who successfully purchases a cryptocurrency mining rig can make their living off of it, and use the cryptocurrency it produces instead of the VEF. This has accelerated the abandonment of the VEF, and is perhaps the real reason the government is trying to ban cryptocurrency mining equipment.

There is some irony in that the Venezuelan government has banned cryptocurrency mining equipment, considering it released its own state-backed cryptocurrency called the Petromoneda.

 

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