Venezuela to Become a Bitcoin Haven?

Conor Maloney

January 31, 2019

Over the past year or so, several states have rolled out plans for state cryptocurrencies, with arguably the most advanced being the Petro in Venezuela.

Like the cryptocurrency being proposed in Iran and the use of crypto in North KorVenezuelanelan authorities aimed to not only bolster their economies but sidestep US sanctions at the same time through either transacting in what is not recognized as legal tender or simply by transacting in private away from the prying eyes of the US government.

Recently, the President of Venezuela’s reign was challenged and perhaps even ended – while Nicólas Maduro is still the sitting president, another politician has declared himself the true president and been recognized by many other nations and governments (including the US and the EU parliament) as the new leader of Venezuela.

Interim President Juan Guaido’s Stance on Bitcoin

Hailing from the centrist, social-democratic Venezuelan opposition party, Guaido has spoken out against the dubious Petro currency which has recently been pegged to $150 by the government despite being supposedly backed by oil which is worth less per barrel.

Tweeting to his +1 million followers, Guaido accused Maduro of “swindling the people with Petro.

In 2014 he also tweeted the news that Venezuela had opened its first Bitcoin exchange, leading many to put two and two together and surmise that the new President favors Bitcoin over Petro.

Centralized State Currencies: All Paths Lead to Bitcoin

The issue with these state cryptocurrencies is always the same.

They are centralized, opaque, and controlled by the government in every aspect including value and distribution. In fact, the only difference between a centralized state crypto and fiat currency is that fiat, at least, is more battle-tested and has wider adoption, whereas state cryptos are met with even more skepticism than their decentralized counterparts.

Ironically, thanks to the incredibly inflated Venezuelan bolivar, Bitcoin has seen very widespread usage in Venezuela throughout the recent economic disaster which has been going on for several years now, with the government going so far as banning all mining equipment imports and proposing a ban on Bitcoin itself to prevent the locals from abandoning their fiat currency altogether.

While people elsewhere bemoan crypto winter and lament that their altcoin portfolios are down 80% – 90%, Venezuelans saw their state fiat currency inflate in value by over 1,000,000%, losing over 99.9% of its value. If someone had $1 million USD in Venezuelan bolivar in 2013, it would be worth approximately $2 today.

People losing their entire life savings to such catastrophic deflation have seen the notoriously volatile Bitcoin as a safe haven. Despite the 80% drop from the ATH in early 2018, Bitcoin is genuinely far more stable than the Venezeulan state currency and far more trustworthy than the Petro which has been criticized as being a scam and a cryptocurrency in name only.

With the local government in shambles and the US circling above the country, one of the richest in oil on the planet, the Venezuelan people are at a crossroads.

To accept aid packages that are bound to be offered by the US will come with strings attached and likely result in a huge tradeoff in natural resources. It seems likely that a new currency is also on the table if the government is truly being overthrown.

What, then, can Venezuelans expect in the near future? Will the new White House-backed president continue to try and maneuver around the US like his predecessor? Possible, but unlikely. However, the state of the Venezuelan economy is not in his hands alone, but the hands of the people. Never has there been such a strong case for the continued adoption and use of a decentralized cryptocurrency as the situation that is and has been unfolding in Venezuela, and it’s certainly worth keeping an eye on in the coming weeks and months.