NEW YORK (InsideBitcoins) — The Venezuelan bolivar has been in serious trouble lately, and it recently dipped into what many would describe as hyperinflation. Inflation in Venezuela exceeded 50% for the month of November, which means the largest note in Venezuela is now worth just over $0.60 USD. This sort of hyperinflation episode has been pointed to as the perfect use case for bitcoin, but many Venezuelans are still not interested in or aware of the digital currency. While the world’s most popular cryptocurrency could provide a few benefits for a country in a state of hyperinflation, some of the original claims made by bitcoin’s biggest supporters could be overblown.
Fleeing the bolivar with bitcoin
For the most part, bitcoin can be useful for black and gray market activities in Venezuela. When a country is dealing with hyperinflation and strict capital controls, the frequency of these sorts of illegal or semi-illegal transactions tend to increase. It’s no secret that Venezuelans try to hoard US dollars and euros in large amounts, but holding large amounts of cash in one’s home can be risky. Instead of hoarding physical foreign cash, it may be a better idea for Venezuelans to hoard bitcoins.
Of course, bitcoin is not exactly the most stable currency in the world, either. Although the cryptocurrency has fared better than the Venezuelan bolivar over the course of 2014, Venezuelans also have the option of locking the value of their bitcoins to US dollars, euros, and other foreign currencies. Certain bitcoin providers, such as Coinapult and BitReserve, are betting that many people in the developing world would like the idea of storing some of their wealth in other assets, such as foreign currencies or gold. The fact that Coinapult is not available to American customers also means that the bitcoin wallet provider does not have to worry about collecting customer information in a database that could be accessed by the Venezuelan government.
Problems with bringing bitcoin to Venezuela
Of course, for anyone in Venezuela to take advantage of bitcoin, they also need to have access to the cryptocurrency. There is an exchange (SurBitcoin) and a small mining community in the South American country, but the problem is that no one wants to trade their bitcoins for Venezuelan bolivars. The exceedingly rapid rate at which the bolivar is falling has actually created a large premium on the bitcoin price in Venezuela. Just getting bitcoins into the country has proven to be difficult because Venezuelans usually need to trade something other than bolivars to get bitcoins.
Bitcoin for online freelancers
Getting paid in bitcoin could be a way for Venezuelans to get around these issues. Although receiving payment in bitcoin via a Venezuelan employer is not likely to happen, online freelancers can reach out to other parts of the globe in search of a bitcoin-denominated income. As mentioned above, those bitcoins can then be locked to their US dollar or euro value instead of converting them to Venezuelan bolivars. However, a portion of the income would still have to be converted back to bolivars due to the fact that it is the only currency that can legally be accepted by merchants. Merchants could technically start accepting bitcoin directly since it is classified as a commodity, but it’s likely that the government would eventually ban bitcoin payments as well. Having said that, risking jail time for accepting payments in other currencies could become practical if the Venezuelan bolivar continues to lose a quarter of its value on a monthly basis.
The opportunities for bitcoin in places like Venezuela are obviously not as clear cut as venture capitalists in Silicon Valley make them out to be, but they still exist. Any technology that helps individuals in economically-restrictive countries gain access to global markets and protect their savings should be applauded.
Thank you to John Villar for helping out with information related to bitcoin in Venezuela for this article.
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