Venezuela's complex economic conditions have led to it being often referred to as a “case study” in Bitcoin, a cryptocurrency practically tailor-made for an economy riddled with hyperinflation and a repressive government.
And although the use of Bitcoin is not a generalized current in Venezuela, that narrative has more or less remained: the country ranks third in the world in terms of Bitcoin adoption, according to a September 2020 report from cryptanalysis firm Chainalysis.
But recent social and political changes in the South American nation may soon put that narrative to the test.
Part of the reason some tech-savvy Venezuelans turned to To protect his wealth and escape the devaluation of the bolivar it was because US dollars were difficult to obtain. Buying them was technically illegal, so citizens turned to the black market to find them.
They don't have to do that anymore. Furthermore, the notoriously "anti-imperialist" government of Nicolás Maduro appears to have now granted the defeat to dollarization, accepting the fact that the dollar is the de facto currency of Venezuela.
Earlier this year, the Maduro government began allowing the Venezuelan banks open accounts for your customers in dollars. Companies can now even start pay your workers in foreign currency, something that would have been unimaginable in Venezuela a decade ago.
So now that Venezuela has opened its doors to dollars, will that diminish the role that Bitcoin plays in the country's informal economy? Regional experts don't think there are many reasons to think so just yet.
For most people, the dollar will continue to provide a “refuge” from inflation for daily transactions, but “it will never be a store of value in the same way that Bitcoin is today,” according to Alberto Zambrano, founder of the AJZ Institute, a regional project that offers training in crypto, blockchain and other technologies.
Saulo Muñoz, an economist specializing in social development, shares a similar vision: "Bitcoin is consolidating as an important aspect of a community that currently rejects fiat money". Muñoz not only sees Bitcoin trading within Venezuela maintaining its momentum, it could even "scale" as new use cases for the cryptocurrency emerge, he said.
Venezuela currently has a very active peer-to-peer Bitcoin trading market. The volume of trade in the country remains the highest among all Latin American nations, according to data from the metrics site Useful Tulips. Aside from an increase in volume in late December and early January, LocalBitcoins peer-to-peer Bitcoin exchange trading among Venezuelans is keeping pace with the levels recorded over the past two years.
That suggests that Bitcoin trading in the country has been stable regardless of price fluctuations and, more recently, regardless of changing government views on currency controls and dollar constraints.
Furthermore, cryptocurrencies seem to become an increasingly important consideration for the Maduro government. In September 2019, Maduro confirmed that the central bank of Venezuela has Bitcoin and Ethereum, the second largest cryptocurrency by market capitalization, among its international reserves. The state remittance platform also accepts cryptocurrencies and the initiative even expanded last week.
According to Muñoz, instead of hampering Bitcoin trading, dollarization in Venezuela can lead to a "diversification of payment methods" on trading platforms.