Crypto in Venezuela: Daily Usage and ‘Seamless’ Bitcoin Transactions
Though she doesn’t know how many people use cryptocurrency in Venezuela exactly, those who do use it, go through a seamless process, according to Jill Carlson, co-founder of the research-oriented, non-profit organization Open Money Initiative.
Carlson herself got interested in cryptocurrency in 2013, when she noticed it giving people the “ability to evade capital controls.” She and her two colleagues traveled to Cúcuta, a Colombian city on the border with Venezuela, where they have talked to the people who have crossed the border. She hasn’t “the slightest idea” how many people use Bitcoin (BTC) in Venezuela, because “the questions that we went in asking were not just about Bitcoin and cryptocurrency, but […] what are the sort of hacks that they’re using in order to survive and in some cases even thrive.”
“People who are being impoverished in Venezuela may or may not be using Bitcoin in order to escape some of that poverty,” she said on a podcast with Bloomberg, but the government officials themselves are using BTC just as much, if not more. She emphasizes that “any time you introduce a new tool to the market, you don’t get to choose who’s using it.”
Cryptocurrency is a gray area – “the Venezuelan government has backed itself into an odd kind of corner when it comes to cryptocurrency,” because it issued its own cryptocurrency in 2017, called the Petro, so “they can’t just make a blanket statement of cryptocurrency is bad.”
Carlson claims she had seen examples of people who are more comfortable using BTC instead of USD. She talked to “a handful” of people who used crypto on a daily basis and who had positive experiences with it, and gave an example of a couple who in two years later became the sole source of income for the family through Bitcoin miners. The woman would deposit BTC on a peer-to-peer marketplace, LocalBitcoins, into an escrow, until she receives the bolivars from the trader. “It was actually quite seamless to the point where she would even do this just as she was walking to the store […] because she doesn’t want to hold the bolivars for any longer than she has to.” On the other side of the transactions, in many cases, are the dedicated traders, often those who left Venezuela but still have access to a Venezuelan bank account.
As reported, social media giant Facebook announced its Libra with a goal to help the people without traditional bank accounts, while also being an alternative form of payment in countries without stable currencies. A problem Carlson sees with here is that ‘unbanked’/‘underbanked’ is a broad category that has to be narrowed down by geography, and by the meaning behind it – is it about extending people’s financial access, or whether it is about poverty.
Crypto would actually be the most useful in places like Venezuela, Cuba, Iran, Somalia, etc., where there is instability, closed financial system, but “it’s the hairiest of places to do business like this.” Regardless of the asset, the first thing that has to be taken into account is cash-in and cash-out. The mentioned LocalBitcoins.com is the one of the only cash-in/cash-out systems that exist for BTC in Venezuela and is the only reason why BTC gets used at all, while other companies, like Coinbase, Alipay, or Wechat, don’t do well there given that Venezuela is sanctioned by the U.S. government.
However, while it’s possible Libra could be an impactful financial product, whether it can deliver on what “bitcoin and other more conventional cryptocurrencies have promised, and in many ways actually delivered on in terms of what the actual utility is,” Carlson is skeptical, because Facebook is a platform, and as such, has the ability to deplatfrom. So the question of, not just content moderation, but financial moderation is also raised. But the role she sees for BTC and cryptocurrencies like it in the future is “the ability to have the truly censorship-resistant money.”
Weekly LocalBitcoins, a peer-to-peer bitcoin marketplace, volume (in bitcoin) in Venezuela: