Bitcoin Expansion in Venezuela

The political and socioeconomic crisis in Venezuela does not show any signs of improvement, and this situation has rendered the sovereign currency virtually worthless. Even local merchants try to avoid conducting transactions with the Nuevo Bolivar, which has devalued to the point that banknotes need to be weighed instead of counted for most payments. Aside from hyperinflation, residents of Venezuela must also deal with strict currency controls imposed by the government, which means that major currencies such as the United States dollar and the euro are hard to come by.

Bitcoin and other digital currencies have emerged as viable fiat alternatives in Venezuela, a trend that has not been welcomed by financial regulators, but which they have been unable to curtail because they cannot prevent the use of underlying technology. To this effect, the government has developed Petro, a centralized cryptocurrency backed by the country's extensive crude oil reserves.

In mid-September, the largest retail and state-owned bank in Venezuela added the option to purchase and manage Petro tokens from personal checking and savings accounts; this is essentially a cryptocurrency wallet because Petro runs on the Ethereum blockchain, and this suggests that it could one day be used to manage Bitcoin transactions. On the day the Petro silently became a mainstream digital currency, Bitcoin trading volumes posted a record high level in Venezuela.

Another sign that underscores cryptocurrency expansion in Venezuela was the September inauguration of the first Bitcoin ATM in the country. The machine is not located in Caracas; it is inside a convenience store in the Tachira region near the border with Colombia, and it also supports two other digital currencies: Dash and Bitcoin Cash. Local reports indicate that this new ATM is experiencing brisk business, particularly with regard to remittances sent from Colombia by Venezuelans who have escaped the desperate situation of their country by means of emigration. It so happens that Colombia is the Latin American country with the highest concentration of cryptocurrency ATMs.

Venezuela could very well become the first major market for widespread cryptocurrency adoption and real circulation; it is happening organically, and it is preventing a full microeconomic collapse. Other countries where Bitcoin and other digital currencies are being preferred to the sovereign fiat include Cuba, Iran, and Zimbabwe, but Venezuela will likely continue to lead the way because now the government is trying to compete directly against the emerging currency trends.