Venezuela sits in seventh place in the global index, above larger regional economies Argentina, Colombia and Brazil, as well as more populated powerhouses United States, China and Russia. The Caribbean country has dropped four places since 2020, while Latin America as a continent only trails Asia and Africa in the index.
The ranking takes into account on-chain value and retail value received, as well as peer-to-peer (P2P) exchange trade volume.
Cryptocurrency use has been growing in Venezuela since 2013. Monitoring site LocalBitcoins estimates that the net annual volume of Venezuela’s cryptocurrency trading has increased from US $1,248 in 2013 to $303 million in 2019. This later dropped to $246 million in 2020.
In April this year, Chainanalysis ranked Venezuela fifth in the world for most visits to cryptocurrency exchange platforms, while in January the country was tenth in cryptocurrency mining despite ongoing electrical shortages hampering activities.
Over 1700 Venezuelan retails or businesses now accept cryptocurrencies for goods and services according to economist Aaron Olmos. Most recently, cable TV provider SimpleTV and Turpial Airways, which flies to Mexico, Panama and the Dominican Republic, as well as offering domestic routes, announced they are to accept crypto-payments.
Cryptocurrencies have also gained ground in mainstream academic institutions. Last week, Caracas’ private Andrés Bello Catholic University announced that it is due to offer a mandatory blockchain and cryptocurrency course for students from October, with other institutions expected to follow suit.
Digital currencies have likewise grown in the country’s large remittances sector, with the government authorizing transfers in Bitcoins, Litecoin and Petros last November with a 10% commission. Copious remittances from Venezuela’s five-million-strong diaspora community are also sent through alternative digital channels, including Zelle and Ethereum.
To boost crypto-usage, Caracas has been revamping its apps and exchange platforms for its oil-backed Petro cryptocurrency this year, while additionally encouraging banks to offer loans and credits in the currency. The Petro has seen an upsurge in value during 2021, with its value jumping from $16 in January to over $50 at the time of writing.
The Petro was launched by the government in 2018 as part of efforts to bypass Washington’s “illegal” and “devastating” financial blockade, which limits the country’s access to the global banking and credit lines and hinders international payments for goods and services.
However, the currency failed to gain initial traction beyond government contracts, public employee bonuses, debt restructuring and international trade deals with allies. It was added to Washington’s sanctions list only days after its launch. A number of US-based cryptocurrency exchange platforms, including Paxful, also backed out of trading with Venezuela for fear of US Treasury measures.
However, the Petro is finally entering the wider economy according to food shop owner Gionaldo López. “People have been holding onto the Petro bonus which the government gave them two or three years ago and have started to come to spend it with us. It’s very profitable, and there are now more suppliers which accept Petros as payment too,” he explained. The Venezuelan cryptocurrency is also reported to be increasingly used at dollar-priced fuel pumps.
Cryptocurrency mining and speculation have likewise gained in popularity amongst Venezuelans as a way to supplement dire local currency wages with hard currency income, as well as protect savings from on-going inflation.
“Many prefer to keep the cryptocurrencies and wait for them to go up in value to then sell and generate money through price speculation,” Olmos went on to say.
For his part, economist and former minister Luis Salas told Venezuelanalysis that the rise in cryptocurrency penetration is to be expected given the country’s economic reality.
“It isn’t strange that many people look to generate reserves of savings to protect themselves from inflation, especially given the critical [economic] situation which Venezuela is living through where the [paper] currency loses value as quickly as it does,” he explained.
Likewise, the country has seen a surge in P2P payment methods of late, as de facto dollarization combined with limited dollar cash supply and local-currency wages often complicates simple purchases. A number of businesses are increasingly accepting cryptocurrencies and other P2P alternatives, such as Zelle or Paypal, as payment for goods or services.
The Venezuelan government is also promoting digital payment platforms through its third currency reconversion due in October. In the reconversion, a new ‘digital bolívar’ currency will knock six zeros off the current ‘strong bolivar.’ The move will be reportedly joined by a number of other measures to boost digital transactions, such as modernizing bank payment systems and platforms.