Venezuelan food delivery driver Pablo Toro has no interest in cryptocurrency or blockchain, but indirectly uses digital tokens whenever he sends money to his family.
Toro, who emigrated to Colombia in 2019, uses an app called Valiu to receive Colombian pesos from his work on the streets of Bogota and deposit the corresponding bolivars into a Venezuelan bank account.
In the Venezuelan economy, bogged down by hyperinflation and surrounded by sanctions, the operation is not so simple.
Valiu uses pesos to buy cryptocurrency which he then sells on LocalBitcoins, a global peer-to-peer site for exchanging tokens in local currencies.
For Toro, the platform is more reliable than informal money changers, the main channel for Venezuelan migrants to send money home. And he doesn’t have to buy traditional money orders in person.
“When the power goes out in Venezuela, when the internet service is down, it has a huge impact on the time it takes to send a remittance to his family,” said Toro, who has stopped working as university security guard because his monthly salary could not even pay for a day of groceries.
“(Now) I don’t have to worry if the cell signal has dropped in Venezuela or if cell service is dropping here.”
As hyperinflation and US sanctions disrupt the Venezuelan economy, cryptocurrency emerges as a way to deliver services managed elsewhere by the traditional banking system.
It has become a tool to send remittances, protect wages from inflation, and help businesses manage cash flow in a rapidly depreciating currency, according to interviews with users and crypto experts. .
Cryptocurrency in Latin America received renewed attention in June after El Salvador adopted Bitcoin as legal tender. It gained popularity in Argentina with the resurgence of inflation.
Chainalysis, a startup that studies blockchain transactions, in a 2020 report, ranked Venezuela third in its global crypto adoption index, largely due to the high volume of bolivar transactions.
Cryptocurrency mining – using powerful computers to solve complex mathematical problems – is an attractive way to generate additional income from Venezuela’s ultra-low electricity prices, but the average citizen cannot afford the equipment.
In Venezuela, crypto is mainly used as a hedge against inflation which causes bank deposits to depreciate sharply within weeks or even days.
“Valiu buys and sells Bitcoin instead of directly exchanging pesos for bolivars due to the lack of availability of this currency in regulated markets,” said Alejandro Machado, head of pilot programs at Valiu.
Bolivar transactions on LocalBitcoins are the largest in value among Latin American currencies, according to LocalBitcoins data analyzed by blockchain advisor UsefulTulips.
LocalBitcoins did not respond to a request for comment.
Traders and cryptocurrency experts say volumes on the site have plummeted amid the growing popularity of Binance, one of the world’s largest cryptocurrency exchanges, which offers trading in a variety of tokens.
These include the so-called “stablecoins” whose values remain stable against specific assets such as the US dollar, thus avoiding the volatility of many cryptocurrencies.
Bolivar’s operations on Binance’s peer-to-peer platform have increased 75% since May, making Venezuela the only Latin American country to have increased trading volumes since Bitcoin prices fell in early May. , a Binance spokesperson said.
Venezuelan President Nicolas Maduro announced in 2017 the creation of the state-backed petro cryptocurrency, but it has little practical application. The government used it in 2019 to make small payments to retirees, and often uses it as a unit of value to price services or fines that are ultimately paid in bolivars.
The United States imposed broad sanctions on Venezuela in 2019 that prevent American citizens from dealing with Maduro’s government. While banks can still deal with private companies or individuals, many shy away from doing so due to the perceived regulatory risk.
The country’s information ministry did not respond to a request for comment.
Fast food chains Pizza Hut and Church’s Chicken as well as some supermarkets are accepting tokens such as Bitcoin and Dash as a form of payment, creating excitement and filling malls and businesses with logos for well-known cryptocurrencies.
But a key part of Venezuela’s crypto operations involves companies abandoning bolivars to fight inflation, said economist and financial expert Aaron Olmos.
“Crypto is being used as a stopgap for the economic situation, but you see it mostly among businesses,” Olmos said.
“Nobody is going to tell you ‘every night when we do the books we convert bolivars to Bitcoin’, but yes it does.”