• The permanent devaluation of the bolivar plus consumers’ and companies’ distrust of the local currency has boosted the use of cryptocurrencies in the South American country.
• Venezuela will be affected by sanctions that the US and European Union imposed on Russia. They also affect Cuba and Nicaragua. These are the countries of Latin America which support the invasion and occupation of Ukraine.

Hyperinflation, constant loss in value of the bolivar and a shortage of banknotes have all contributed to the rise in cryptocurrency use in Venezuela over the past three years. This is explained by economist Aaron Olmos.

Merchants and customers found it so difficult to deal with the bolivar that they began to use other forms of payment.

Despite the obstacles put in place by the government of Nicolás Maduro for trade in currencies other than the bolivar, the general population has turned to the use of the dollar, the euro, and the Colombian peso, as well as cryptocurrencies to pay for goods and services and carry out any commercial transaction.

Venezuela was the Latin American country in which the majority of people use digital money most. According to Olmos, the EFE received statements from Olmos explaining that in an environment of hyperinflation and lack of confidence regarding monetary policy, digital assets had a chance to grow.

Venezuelans Save in Cryptocurrency by Mining Bitcoin

Even though there are constant power cuts and some of the worst internet connections in the world (and the country has the fastest), many Venezuelans have made it their mission to mine. If you don’t have a dollar account abroad, cryptocurrencies can also be used as a storage of value to help you keep your money.

In the country’s capital of Caracas, it is normal to see advertisements on the street related to crypto trading, including on billboards, bus stops, taxis, electric power poles, and on the facades of commercial establishments.

According to historical data from LocalBitcoin, 2019 marked the peak of operations per year. Experts pointed this out, using data from LocalBitcoin. From a 2013 low of $1,248, trades equivalent to $303million were made in one year.

The Chainalysis Global Cryptocurrency Adoption Index shows that Venezuela ranks among the top countries of the region for using cryptocurrencies. Venezuela ranks among the Top Ten Countries for Cryptocurrency Users, according to most current data.

Venezuelan Economy Will Benefit from Russia Support

Due to Russia’s dependence to export its oil, Venezuela will likely suffer economic consequences from the US and EU sanctions. The socialist regime of Nicolás Maduro, together with those of Cuba and Nicaragua, have been the only ones in Latin America to support Russia’s invasion of Ukraine.

The strong commercial and political ties of these three countries with the government of Vladimir Putin will make these countries “feel the squeeze,” said the director of the National Security Council for the Western Hemisphere, Juan González, in statements to the Voz de América.

The US government sanctioned Venezuela for permanent violations of human rights. This was after the 2018 disputed presidential election, which resulted in the victory of President Maduro.

González said that the sanctions against the Russian government and oligarchy are so robust that “they will have an impact on those countries that have economic affiliations with Russia, and that is by design.”
“Venezuela is going to begin to feel that pressure, Nicaragua is going to feel that pressure, as well as Cuba,” González said. “But in the end, what we want are negotiated solutions to the crisis in Venezuela, with a restoration of the democratic order in Nicaragua, and we want the Cubans to be the ones who determine their future, and not a dictatorship.”

The Government is also affected by the disconnection of SWIFT

Juan Guerra (opposition deputy) explained that Russia’s SWIFT network is being disconnected and will affect the accounts of Venezuelan government.

“If the government money is in Russian banks, they will not be able to be transferred to make payments. He said that everything becomes complicated.”
He gave as an example that “If PDVSA has an account in a Russian bank excluded from SWIFT and wants to make a transfer to Banxico in Mexico, UBS in Switzerland or a bank in Turkey to pay a supplier, it will not be able to do so that way.”

The Flipside

• The Petro digital currency was issued by the Petro government, which is the first of its kind in the world. However, it has been difficult for the government to convince the people to use it, as it creates the same distrust that the bolivar.
• A conversion of the Petro to CBDC was attempted, however, its listing and administration are not transparent because its price is arbitrarily set by the Central Bank. This bank is independent.
• Venezuelan oligarchs who were linked to the regime and had accounts in Russian dollars or other currency in Russia, will have difficulty using their money.

Why you should care

• After the collapse of the price of the ruble on Monday to less than 1 cent on the dollar, the losses for the Venezuelan government and for the regime’s officials who have accounts in Russian banks are gigantic when converting to euros or dollars.

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