How Are Venezuela’s Economy Gaps Filled With Crypto

By 28 December, 2022

The economic situation in Venezuela has been deteriorating steadily for many years, as the country is under sanctions. The Venezuelan bolivar experienced hyperinflation, as a result of which the government announced the denomination of the national currency. To somehow improve the situation, the authorities decided to issue their cryptocurrency – El Petro. Oil, gas, gold, and diamonds became the collateral for this cryptocurrency, and one unit was equal to a barrel of oil. According to buidlbee, now lots of people all over the world try to earn with the help of crypto and Venezuela wanted to improve its economic situation.

The country had a huge public debt. The new cryptocurrency could supposedly pay it off and pay foreign investors on bonds. Although at once they were somewhat skeptical about this.

El Petro is based on the Ethereum blockchain platform, according to the ERC20 standard. To use the currency, users need an electronic wallet. During the private placement and subsequent ICO, tokens can only be purchased for hard currency (for example, the US dollar) or existing cryptocurrencies.

Despite efforts to popularize it, due to problems with the demand among the population and business, El Petro is not used. Also, the refusal of citizens is because the Central Bank of Venezuela buys it at a many times lower rate; it is also redeemed at half price on electronic exchange services. It is believed that the announcement of the creation of a national cryptocurrency was populist.

In all countries of the world, all services can be processed by the traditional banking system. However, the situation in Venezuela is quite different. Because inflation is growing, sanctions are not weakening, the Venezuelan economy is suffering very much. And it is a cryptocurrency that comes to the rescue. It makes it possible to provide many services.

As we found out from the example of sending money from one country to Venezuela, cryptocurrency is becoming the tool with which ordinary citizens can somehow help their families. It can protect wages from inflation. What’s more, El Petro can help businesses manage their cash flow in a rapidly depreciating currency.

In June 2022, El Salvador made new changes to the payment policy. By order of the President, bitcoin became legal tender. Therefore, cryptocurrency continues to attract attention in Latin America.

Venezuela has a huge number of bolivar transactions, which is why the startup Chainalysis ranked this country third in the Global Cryptocurrency Adoption Index.

Venezuela has a very low cost of electricity. To mine, you need a lot of electricity so that powerful computers can do their job and make money. Accordingly, in terms of electricity costs, it would be profitable to mine cryptocurrency in Venezuela. However, on the other hand, the average citizen will not be able to afford expensive equipment. In November 2020, the Center for the Production of Digital Assets (Centro de Production de Activos Digitales) began its operations in Caracas. That is, the military decided to mine KrV, and for this business, they created a special center for mining, as well as assembling and repairing equipment for it. In Venezuela, there are informal groups of volunteers who promote such payment among citizens and shopkeepers. In 2021, more than 1,200 citizens and 500 merchants are connected in 20 cities in Venezuela. Stickers can be found in various stores, for example, electronic equipment.

However, the majority of cryptocurrency trades in Venezuela are carried out by companies trading bolivares to combat inflation.

For the effective crypto-currency activities of the government, a separate structure was formed – the National Committee for the Supervision of Crypto Assets and Related Activities (SUNACRIP). On the streets of the capital – Caracas and suburban areas, there are many billboards advertising “Bitcoin”. But the situation in the country is quite difficult. Many predict that cryptocurrencies in general will not be able to help Venezuela in the fight, but others say the opposite. Nevertheless, at the moment, the possibility of using cryptocurrencies in Venezuela exists and citizens use them.

The situation with the introduction of cryptocurrencies into everyday life in Venezuela tends to develop. The country is one of the leaders in the region in terms of mining and cryptocurrency turnover. But the government does not have a detailed plan on this issue.

With low confidence in the national currency and hyperinflation in the country, the main RCs are the most acceptable form of retail trade after the US dollar. Persons who are in Venezuela and have CVs can provide themselves with a fairly comfortable stay without fiat cash / non-cash funds. In almost all areas, there is the possibility of paying for KRV – cafes, medical services, renting hotels and cars, replenishing mobile communications and Internet services, buying air tickets, electronics, food / non-food products, etc.

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