Crypto goes mainstream in Venezuela

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Cryptocurrencies are transforming from a niche concern into a significant feature of Venezuela’s economy, as locals see the blockchain as a bulwark against their cratering currency and a government crackdown on black market dollars. 

Shops from family-run independents to nationwide chains are taking payments through digital wallet platforms such as Binance and Airtm. Some businesses are using it to pay staff. And one of the country’s top universities now offers a course on the sector. 

“There’s lots of places accepting it now,” said shopper Victor Sousa as he paid for phone accessories with USDT, a stablecoin pegged to the dollar. “The plan is to one day have my savings in crypto.”

Cryptocurrencies were surging in Venezuela even before the bolívar currency went into freefall late last year. In the 12 months to June 2024, their use climbed 110 per cent, according to data company Chainalysis, which ranked the country 13th in the world for crypto adoption.

But since the government stopped defending the bolívar in October, citizens are even more desperate for a safe haven. The country’s currency lost more than 70 per cent of its value between October and June, while annual inflation has soared, hitting 229 per cent in May, according to the independent Venezuelan Finance Observatory (OVF).

“Venezuelans started using cryptocurrencies out of necessity” as they battle “inflation, low wages, foreign currency shortages, and the inaccessibility of opening a bank account”, said Aarón Olmos, an economist at the Institute of Higher Studies in Administration in Caracas.

Authoritarian President Nicolás Maduro has accelerated the shift by, in an apparent attempt to support the bolívar, arresting dozens of people for running websites that list black market dollar exchange rates. 

The central bank, under Maduro’s influence, has not published inflation data since October, while independent economists have been arrested. The OVF has not released its own figures since May, as its members suffer government harassment. 

The Trump administration last month granted Maduro a reprieve by allowing Chevron to resume producing and exporting crude oil from Venezuela, which remains under broad sanctions. The licence, which the democratic opposition has called a “lifeline” for Maduro, will bring much-needed dollars into the country’s coffers.

But Venezuelans, some of whom started using crypto during the country’s devastating hyperinflation crisis from 2016 to 2019, will be cautious. 

“In an economy as distorted as ours, sound judgment can be more valuable than capital,” said Aníbal Garrido, director of the course on cryptocurrencies at Andrés Bello Catholic University in Caracas.

Even senior government officials have turned to crypto, with several indicted by the US for using virtual currencies to evade sanctions or launder money.

The government itself has had an on-off relationship with cryptocurrencies. In 2018, Venezuela became the first country in the world to create a national cryptocurrency, the petro. But, despite Maduro trying to peg 50 per cent of the minimum wage to the petro, the coin failed to gain traction and was finally abandoned last year. 

Maduro’s government had shut down the main crypto exchange regulator in 2023, after its leadership was accused of embezzling millions in oil-linked crypto transactions.

But the use of USDT is becoming ever more widespread. 

Gabriel Santana, an accountant for a small hardware store in Caracas, often pays suppliers and even employees using the stablecoin. He generally loses money when converting the currency, but the pace of inflation and the bolívar’s decline offset those losses.

“When a lot of bolívars come in, we buy USDT on Binance, and although we lose a bit, there’s a gain in the long run,” Santana said. 

Accessing crypto is not always straightforward. With US sanctions targeting Venezuela’s banking sector, Binance — which was fined $4.3bn in 2023 by US authorities for failing to prevent money laundering — limits services involving sanctioned banks and blocks accounts tied to sanctioned individuals.

“There’s limited access to platforms, infrastructure, and even basic connectivity services but even with those challenges, the ecosystem continues to grow,” said Garrido. “In the midst of adversity, a community is forming — one that is increasingly critical and better informed.”

Shopkeepers in central Caracas say adding crypto to their range of payment options is now essential to competing with rivals. 

Masiel Bronco, who runs a small technology shop, said he would lose business if he did not accept payment in USDT. “There’s a lot of competition,” he said.