Venezuelans Use Bitcoin as Gateway to Buy Foreign Fiat – Research

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Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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June 26, 2023 06:54 EDT

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Bitcoin (BTC) continues to boom in Venezuela – but only because it is helping citizens buy hard-to-purchase foreign fiats, says an industry observer.

As previously reported, trading volumes on peer-to-peer (P2P) platform LocalBitcoins have spiked again in recent weeks.

In a report from the Open Money Initiative, author Matt Ahlborg wrote,

“For a long time, the bitcoin community had surmised that the increase in bitcoin volume must mean it was being used as a store of value against the devaluing bolivar. We can now confidently say that this isn’t the primary use case.”

Instead, the Open Money Initiative’s findings indicate that rather than using bitcoin “as a store of value endpoint,” it is instead being used “as a channel on the road to obtain more stable currencies such as the United States dollar, Colombian peso, Chinese yuan, and various stablecoins.”

And the report’s authors say that one specific demographic group may well be responsible for the vast majority of trading on LocalBitcoins and similar platforms – namely Chinese Venezuelans.

There are some 450,000 ethnic Chinese in Venezuela, and Ahlborg wrote,

“Looking through advertisements and trading data on LocalBitcoins, we found that a sizable chunk of those selling bolivars to acquire bitcoins on LocalBitcoins are members of the Chinese-Venezuelan community. It seems likely that they are channeling profits from their bolivar-heavy cashflow businesses within Venezuela (restaurants and general stores), converting them and sending them to Chinese yuan accounts in China or US dollar accounts in Panama or the United States for saving and commerce payments.”

Indeed, the report goes on to note that “money transferred out of Venezuela may be held in a host of fintech applications” including Chinese favorites like Alipay and WeChat Pay” – although “crypto exchanges such as Bitfinex or Binance” were other popular destinations.

Ahlborg added that bitcoin converted to fiat was also being used online to pay for “streaming services like Netflix, video games on Steam or even physical goods on Amazon, which can be sent to Venezuela via courier services.”

Meanwhile, the United States Department of Justice has issued an indictment on Venezuelan leaders, including President Nicolás Maduro, whom they have accused of cryptocurrency-powered “narco-terrorism.”

The indictment also names Joselit Ramirez, the head of Sunacrip (Venezuela’s cryptocurrency agency), as a “narco-terrorism” accomplice. The American agency says that Ramirez helped Maduro and others avoid American sanctions in 2018.