With Venezuela’s economy in crisis, cryptocurrency fills the gaps

Photo: Luisa González -Reuters

 

Pablo Toro, a Venezuelan food delivery driver in Colombia, uses digital tokens every time he sends money to his family.

By Aljazeera

Jun 22, 2021

Venezuelan food delivery driver Pablo Toro has no stake in cryptocurrency or blockchain, but indirectly uses digital tokens every time he sends money to his family.

Toro, who emigrated to Colombia in 2019, uses an app called Valiu to receive Colombian pesos from working on Bogota’s streets and deposit the corresponding bolivars into a Venezuelan bank account.

In Venezuela’s economy, mired by hyperinflation and hemmed in by sanctions, the operation is not so straightforward.

Valiu uses pesos to buy cryptocurrency that it then sells on LocalBitcoins, a global peer-to-peer site for trading tokens in local currencies.

For Toro, the platform is more reliable than informal money changers, the main channel for Venezuelan migrants to send money home. And he need not buy traditional money orders in person.

“When the power is out in Venezuela, when internet service is down, it has a huge impact on how long it takes to send a remittance to one’s family,” said Toro, who quit working as a university security guard because his monthly salary could not even pay for a day’s groceries.

As hyperinflation and United States sanctions disrupt Venezuela’s economy, cryptocurrency is emerging as a way to provide services handled elsewhere by the traditional banking system.

It has become a tool to send remittances, protect wages from inflation and help businesses manage cash flow in a quickly depreciating currency, according to interviews with crypto users and experts.

Cryptocurrency in Latin America got renewed attention in June after El Salvador adopted Bitcoin as legal tender. It has grown in popularity in Argentina as inflation resurged.

Chainalysis, a startup that researches blockchain transactions, in a 2020 report ranked Venezuela third on its Global Crypto Adoption Index, largely due to the high volume of bolivar transactions.

Mining cryptocurrency – using high-powered computers to solve complex math problems – is an attractive way to make extra income thanks to Venezuela’s ultra-low power prices, but the average citizen cannot afford the equipment.

In Venezuela, crypto is mainly used to hedge against inflation that causes bank deposits to sharply depreciate in weeks or even days.

Read More: Aljazeera – With Venezuela’s economy in crisis, cryptocurrency fills the gaps

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