Could Bitcoin Smash Socialism in Venezuela?

[Hydrogen]

Nicolás Maduro’s mismanagement may have brought dark days for Venezuela, but there’s a Bitcoin-shaped light at the end of the tunnel.

Between hyperinflation, stalled oil operations, and deepening tensions with the United States, it is safe to say that Venezuela is in crisis and it is ordinary Venezuelans who are hurting the most.

Hyperinflation means that many Venezuelans are forced to use black-market dollars in order to purchase goods. However, there is hope on the horizon. Cryptocurrencies like Bitcoin could help Venezuelans break out of their government’s self-made crisis and thrive.

A Crashing Bolivar Has Caused Economic Disaster

Crypto use in Venezuela has been driven by a catastrophic economic collapse. Since 2013 the value of the Venezuelan Bolivar has lost more than 200,000 percent in value compared to the US dollar. This has led to skyrocketing prices. This situation has been significantly worsened by tightening US sanctions and increased unemployment.

This has led to a surge in emigration and thus a surge in remittances sent back to the nation. Ecoanalítica estimated that in 2019 around $4 billion flowed back into Venezuela from abroad and that there were another $1.5 billion in withdrawals from foreign bank accounts. However, these remittances often lose a lot of value if sent using traditional means, and every dollar counts in a country experiencing shortages of just about every necessity.

Venezuelans Have Turned to Cryptocurrency to Survive

In the face of these troubles, Venezuelans have turned to Bitcoin and other cryptocurrencies. Unlike US dollars, Bitcoin (BTC) can be purchased digitally and directly by using Peer2Peer (P2P) exchanges. It is an asset that can be purchased anywhere in the world.

This has enabled Venezuelans to digitally convert remittances or foreign bank accounts into cryptocurrency. This has the advantage of being more stable than the local Bolivar. In fact, recently, the value of the major cryptocurrencies have been rising.

Venezuela is one of the most rapid adopters of cryptocurrency in the world. Typically, Venezuelans aren’t holding cryptocurrency as a long-term hedge against inflation. Instead, they are using it to buy food, medical supplies, and day-to-day purchases.

In order to accommodate this, merchants in Venezuela have started to directly accept BTC payments. A deal between Panamanian-based cryptocurrency exchange Cryptobuyer and Venezuelan payments processor Mega Soft has created around 20,000 point-of-sale terminals in the South American nation.

However, even with these services, Bitcoin can be difficult to use and many Venezuelans have instead turned to custodial solutions like AirTM. This wallet allows Venezuelans to spend their Bitcoin within a network, making it easier to send and receive cryptocurrency.

This is particularly useful for freelancers and makes it easier for Venezuelans to make purchases abroad. Without Bitcoin and the private companies offering related services, it would be exceedingly difficult for many Venezuelans to function.

The Venezuelan Government Is Trying to Wrest Control of the Crypto Revolution

Cryptocurrency is a lifeline for many Venezuelans but it is a headache for Nicolás Maduro's government. One of the key positives of Bitcoin is that it provides a way for citizens to engage in commerce and trade without government interference. This enables a black market to form outside of the government’s control, which could weaken its grip over the populace.

In order to combat this, the government has taken steps to create a nationalized cryptocurrency. The first attempt was to create the Petro in 2018. This coin was tied to Venezuelan oil and provided a state-approved alternative to other cryptocurrencies. The government eagerly pushed the cryptocurrency and made payments for passports and other government services in Petro mandatory.

Despite this backing, the Petro fell flat. Many were concerned about reports that the Venezuelan oil that supposedly backed the coin didn’t exist and that the true backer was the debt-ridden state oil operator PDVSA. Additionally, the Petro saw limited external support from Venezuela’s allies. Since Venezuelans were reluctant to adopt the cryptocurrency, the Petro is all but dead.

Venezuelan Government Gets Behind Crypto

However, the Venezuelan government hasn’t abandoned its cryptocurrency ambitions. It has realized that it can take advantage of the private nature of cryptocurrencies to circumvent international sanctions.

In September, Maduro announced that his government would begin using cryptocurrencies for domestic and international trade. It appears that the government plans to experiment with holding Bitcoin and Ethereum to help replace its static oil reserves.

On the back of this announcement, the Venezuelan government has introduced a new DeFi platform called BDVE that will supposedly allow Venezuelan citizens to swap ERC20 tokens in a noncustodial manner. However, many observers are skeptical about the government’s claims that it is decentralized, and the registration process requires users to reveal their identities.

Could Crypto Herald the End of Socialism in Venezuela?

While these do seem like the desperate attempts of a government to claw back control, the embrace of cryptocurrency by the Venezuelan government could be a sign of positive change. If it pushes through with attempts to build state-backed platforms, this will introduce more Venezuelans to the idea of cryptocurrency, and could add a further boost to cryptocurrency use.

Glasnost and Perestroika bought freedoms that eventually triggered the collapse of the Soviet Union. We could be witnessing the beginning of a similar phenomenon in Venezuela. It is entirely plausible that state-backed economic freedoms in the form of cryptocurrency will help weaken government control over its citizens and inadvertently usher in more libertarian economic policies by weakening the control of the state.

In any case, increased access to cryptocurrency can only be positive for Venezuelans. A more liquid and stable means of payment and transfer would go some distance to mitigating the disastrous decisions of the socialist government in the South American nation.

With some luck, decentralized currencies could help to break down the grip of the state and let Venezuelans finally breathe free.

https://fee.org/articles/how-bitcoin-could-smash-socialism-in-venezuela/

....


Seems like a good write up. What appears to be good information on how cryptocurrencies can help the poor and provide economic opportunities and options in nations under siege as venezuela is atm.

My main issue is the tendency many have to attribute policy in venezuela solely to Nicolas Maduro. Circumstances in venezuela appear to be determined partly by international support venezuela receives from special interests and communist/socialist regimes like cuba and china. Donald Trump proposed forcibly removing Maduro from power when he was President 2016-2020. This proposal was met with considerable opposition from various factions. For various reasons. The USA doesn't have the best record of liberating oppressed nations from tyrannical dictators. Iraq which was "liberated" more than a decade ago may still be struggling. The united states itself expending trillions of dollars in the effort, due to its lack of planning and exit strategy.

Venezuela's situation could closely resemble nigeria's. In the future we may see nigeria's central bank roll out its own cryptocurrency identical to venezuela rolling out their ill fated petro years ago.

[Hydrogen]

Want opinions & commentary on this.

Bump.

[just_Alice]

It is good that people in Venezuela have found a temporary solution for all that disaster they're currently struggling with. Using crypto gives them some freedom and the possibility to avoid giving their money to the government, while the latter keeps stealing it. And that is why, I think, none of the state-backed cryptos will work in Venezuela, for the same reason Petro didn't work. It's just the same old government, only trying to manipulate people and the local economy for their own good by means of self-made cryptocurrency, over which they have total control. I think, for now, the population will turn to Bitcoin as a lifesaver until this whole situation is resolved.

[malevolent]

They have bigger problems than Bitcoin alone can solve, but there's a ray of hope as even some of their commies started coming to senses looking at their recent (attempts at) market reforms, even if they're just dipping toes in the water.

https://www.ft.com/content/26b1232c-30b8-4f51-9a38-56874af73529

My main issue is the tendency many have to attribute policy in venezuela solely to Nicolas Maduro. Circumstances in venezuela appear to be determined partly by international support venezuela receives from special interests and communist/socialist regimes like cuba and china. Donald Trump proposed forcibly removing Maduro from power when he was President 2016-2020. This proposal was met with considerable opposition from various factions. For various reasons. The USA doesn't have the best record of liberating oppressed nations from tyrannical dictators. Iraq which was "liberated" more than a decade ago may still be struggling. The united states itself expending trillions of dollars in the effort, due to its lack of planning and exit strategy.

Venezuela's situation could closely resemble nigeria's. In the future we may see nigeria's central bank roll out its own cryptocurrency identical to venezuela rolling out their ill fated petro years ago.

The country started declining under Chavez, Maduro is not the only one who should be blamed, but external circumstances are overrated. Sanctions were enacted late when most of the harm has already been done, and Trump shouldn't be taken seriously. USA would be risking a lot for little gain.

[Coyster]

Venezuela's situation could closely resemble nigeria's. In the future we may see nigeria's central bank roll out its own cryptocurrency identical to venezuela rolling out their ill fated petro years ago.

Imo, this countries are 'firing at the wrong target', both the Nigerian and Venezuelan economy has definitely seen better days, thus I don't see why their governments should stand as an opposition to decentralized cryptocurrencies, Bitcoin acts like a sort of panacea to the problems of quite a lot of citizens from this nations, and the thing is, it could also positively affect the general economic situation, when citizens make 'extra' funds, they could start small-scale businesses which invariably becomes a plus to the nations microeconomics, and also, basically just having more money to spend (which Bitcoin provides) is economically beneficial, and that's the same reason why some countries give out stimulus bonuses.

Having said that, I think it's a really counterproductive decision for a country that's battling with inflation, hyperinflation or a comatose economy like that of Venezuela to work on launching CBDC's, cause it's still going to be controlled by them, and backed by either their constantly devaluing fiat, or whatever resource the country has, that's still already affected by the said inflation. It's a misplaced priority if you ask me, the Nigerian/Venezuelan government should basically just allow Bitcoin thrive in their shores as they seek ways to awaken their near-dead economy.

[aesma]

There isn't much of an economy outside oil, that's the main issue. The government based all its policies (which weren't all bad) on oil revenue, while at the same time putting friends and family in charge of the oil company, instead of competent people.

I'm not sure how you come back from that, and I doubt "libertarianism" is a good idea. Social democracy would make more sense.

[Sithara007]

There isn't much of an economy outside oil, that's the main issue. The government based all its policies (which weren't all bad) on oil revenue, while at the same time putting friends and family in charge of the oil company, instead of competent people.

I'm not sure how you come back from that, and I doubt "libertarianism" is a good idea. Social democracy would make more sense.

There are countries such as Saudi Arabia and Qatar, who are solely dependent on the oil/natural gas revenues to fund their budgets, so the real issue is not overdependence on the oil sector. The main issue is that when the oil prices were high, the Venezuelan government wasted all of that revenue on unnecessary expenses. And then the crude prices crashed and they don't have enough money to fund their budget.

[Darker45]

As an answer to the question posed in the subject, no, I don't think so. I don't even think Bitcoin plays a very significant role in Venezuela's national economy right now, and definitely much much lesser in socio-political issues. Foreign remittance is probably where Bitcoin is very much useful, and perhaps among middle class citizens who still have pretty open access to the online world. However, I think the great majority of domestic day-to-day transactions are still done in the local currency, and Bitcoin and other cryptocurrencies will have to be converted to it first before getting spent.

What would definitely smash socialism out of Venezuela is its continuous poor leadership which results to an even higher inflation further resulting to a steady increase in poverty rate, unemployment, migration, crimes, and so on and so forth. Disillusionment will eventually arrive among the populace. The current grip to power of Maduro and the United Socialist Party of Venezuela will sooner loosen up and everything will just crumble down. And all this has nothing to do with Bitcoin.

[magneto]

My only concern is that the Venezuelan government will do a bait and switch.

They might use the guise of increasing access to decentralised cryptos to push their own centralised altcoin/trading platform, which they have already done before. Clearly, they want a piece of the crypto cake and they're not afraid to defraud their own citizens for it.

But in terms of actual mass adoption, it is a bit far fetched right now. When your citizens are struggling to even survive, it is unlikely that the majority will be able to use BTC in any meaningful way as a store of value anyhow - as low its barriers to entry already are.

[Silberman]

Venezuela's situation could closely resemble nigeria's. In the future we may see nigeria's central bank roll out its own cryptocurrency identical to venezuela rolling out their ill fated petro years ago.

Imo, this countries are 'firing at the wrong target', both the Nigerian and Venezuelan economy has definitely seen better days, thus I don't see why their governments should stand as an opposition to decentralized cryptocurrencies, Bitcoin acts like a sort of panacea to the problems of quite a lot of citizens from this nations, and the thing is, it could also positively affect the general economic situation, when citizens make 'extra' funds, they could start small-scale businesses which invariably becomes a plus to the nations microeconomics, and also, basically just having more money to spend (which Bitcoin provides) is economically beneficial, and that's the same reason why some countries give out stimulus bonuses.

Having said that, I think it's a really counterproductive decision for a country that's battling with inflation, hyperinflation or a comatose economy like that of Venezuela to work on launching CBDC's, cause it's still going to be controlled by them, and backed by either their constantly devaluing fiat, or whatever resource the country has, that's still already affected by the said inflation. It's a misplaced priority if you ask me, the Nigerian/Venezuelan government should basically just allow Bitcoin thrive in their shores as they seek ways to awaken their near-dead economy.

Governments for the most part think they can get away with everything, and if we are honest why should they think otherwise when so far it has been true? The government of Venezuela got away with so many things and yet a sector of its population kept celebrating the actions of the government when for the rest of the world it became obvious that no one will invest in the country anymore with those policies in place, now that day has finally come and the government is trying to do everything to remain in power even if it means trying to block bitcoin, one of the few ways some of their citizens have found to avoid abject poverty.

[davis196]

NO.Bitcoin cannot smash socialism in Venezuela.I don't even think that the Maduro regime can be called "socialist".It is a mix of incompetence,corruption and state owned crony capitalism.
Bitcoin can help for the poor and middle class people to exchange goods and services and survive,by abandoning the worthless bolivar.
The regime in Venezuela is supported by the army and some para-military armed squads.Thinking that cryptocurrencies can destroy a dictatorial regime,that is based on force and oppression is simply naive.

[Mauser]

Want opinions & commentary on this.

Bump.

While there are a loit of similarities between Venezuela and Nigeria we need to focus one fact, which is that the confidence in the venezuelan bolivar is very poor these days. Due to hyper inflation people just don't trust their own currency anymore. Where ever possible things are being paid in USD. So even if the government decides to create their own digitial currency it won't bring any confidence into the market. Sure they could make all other cryptos illegal and try to force people in using their own coin, but if people don't believe they won't be buying it.

[YOSHIE]

Venezuela is experiencing its biggest economic problem right now, with inflation already at 13,000% against the bolivar, measured in dollars only: 1 bolivar: $0.00004, that's totally worthless.
Crypto or Bitcoin cannot help the growth or save the economic growth of the Venezuelan people, Bitcoin is traded based on the currency of every country: / 1 Btc.

Just imagine 10 bolivars worth one candy, if, Venezuelan people want to buy crypto or Bitcoin have to collect one warehouse of bolivars for 1 Bitcoin or half of it.

Although they have Bitcoin stored from 2018, and sell it now the result is the same, if that is converted into a bolivar, one warehouse also has no meaning.
Except: they exchange Bitcoin in dollars, this could be that they get prosperity and spend in dollars, meaning not using bolivars.
So: Venezuelan people are currently constrained by the bolivar value factor, not Bitcoin, even though they use bitcoin, it is still measured by the value of the bolivar currency, the result is the same, no change.

[iv4n]

...What appears to be good information on how cryptocurrencies can help the poor and provide economic opportunities and options in nations under siege as Venezuela is atm.

I think Bitcoin can't do much alone, but Bitcoin with alts (cryptocurrencies) can do a lot!
It's my opinion, and you can see that in some of my comments! Venezuela is just one of the "bad" examples of what this traditional economy is doing for centuries... It's too corrupted, and believe it or not powerful countries and their big banks are pretty much responsible for all that shit around that last for too long..
Crypto can be very transparent, easy to use... crypto is a tool that can be used for many good things! Of course, if it's used in the right way! People can have a vote that will count, and politicians together with banks will not be able to interfere and change everything in their favor! They will not be able to change the chain whenever they like it!

[oHnK]

The fact is that the US has never properly done its job in liberating the country.  Venezuela is also on a bad note.  It seems that crypto is the best solution in solving the economy, as long as society accepts crypto policies it will run well.  But unfortunately the government in that country also doesn't have a good GCG.  Their fate is not even clear with it all.  They need leaders who really love their country to save their people.

[bitmover]

My main issue is the tendency many have to attribute policy in venezuela solely to Nicolas Maduro. Circumstances in venezuela appear to be determined partly by international support venezuela receives from special interests and communist/socialist regimes like cuba and china.

Not only Cuba and China, but Russia and even Brazil as well. Our former president, Lula, was openly socialist and he was very close to Madura and Chaves. For years Brazil was sustaining dying dictatorships


Look here:
https://noticias.uol.com.br/politica/ultimas-noticias/2018/03/27/brasil-liberou-r-23-bi-para-odebrecht-fazer-metro-na-venezuela-obras-comecaram-a-10-anos-e-estao-abandonadas-pela-metade-desde-2015.htm

Google translated:

Brazil released R $ 2.2 billion for Odebrecht subways in Venezuela; after 10 years, works are half done.
...
However, ten years after the beginning of the construction work performed by the Brazilian contractor Odebrecht with financing from BNDES (Brazil National Bank for Economic and Social Development), the 1.5 km stretch between the Bello Monte and Zona Rental stations (which connects with other subway lines in the Venezuelan capital) is the only one still functioning today.

...On Tuesday (20), UOL revealed that Venezuela stopped paying R $ 901 million, referring to part of the loans made with BNDES and other private banks due in January. US $ 130.9 million was contracted directly with BNDES and US $ 143.7 million with private creditors.

Back to OP question:
Bitcoin cannot save venezuela. But it can help some individuals, and even save a few of them.

Bitcoin is about individual freedom, not about a country freedom, or democracy.

Brazil is still suffering now from bad leaders decision. Bitcoin is what is making me sleep well, knowing that I am somehow "shielded" from money printing and other problems we have in developing countries.

[Kakmakr]

You know ..... trying to circumvent international sanctions with whatever currency will not change their Socialism mindset and that is where the real problem is. The penalties for the countries that are doing this, will also be severe... so I think they must re-think their strategies.

It is not the sanctions that are killing them, it is piss poor political agendas ...and we saw the same thing happening with countries like Zimbabwe in Africa. (They live in that country, but it is actually economically owned by foreign capital from the East) 

[bryant.coleman]

You know ..... trying to circumvent international sanctions with whatever currency will not change their Socialism mindset and that is where the real problem is. The penalties for the countries that are doing this, will also be severe... so I think they must re-think their strategies.

It is not the sanctions that are killing them, it is piss poor political agendas ...and we saw the same thing happening with countries like Zimbabwe in Africa. (They live in that country, but it is actually economically owned by foreign capital from the East) 

Latin American countries do have an affinity towards socialism (perhaps with the exception of Brazil). There is huge wealth inequality in these nations and the Socialists came to power promising to eradicate this gap. When Hugo Chavez became president, he did a lot of good things such as providing free healthcare. But then the oil prices crashed and the regime realized that they have run out of money.

[bitbollo]

I don't know if it's just a matters of time, but this "crypto" revolution is lasting from few years in Venezuela.
Probably the problem of the country isn't just a monetary issue but it's also related to the whole management of the situation.
For sure this is an huge success for crypto currencies since we are seeing a "real world" use case that has really helped some people.

[stompix]

Venezuela is one of the most rapid adopters of cryptocurrency in the world. Typically, Venezuelans aren’t holding cryptocurrency as a long-term hedge against inflation. Instead, they are using it to buy food, medical supplies, and day-to-day purchases.

Hahaha, yeah right!

The last transaction that would have been confirmed as I speak would have had to pay 102sat/b which's almost 8$ for the smallest tx.
You're telling me that people in Venezuela will pay 240$ a month, more than their median wage to buy stuff with bitcoin?
Get real, nobody is using bitcoin there to buy food with, and if somebody does he isn't using on-chain transaction.

It's my opinion, and you can see that in some of my comments! Venezuela is just one of the "bad" examples of what this traditional economy is doing for centuries... It's too corrupted, and believe it or not powerful countries and their big banks are pretty much responsible for all that shit around that last for too long..

Oh yeah, we're responsible for all the crap that their leaders have done so!
When they were nationalizing everything they could get their hands on and giving it away they were heroes, now when we don't want to give them more money to spend on useless garbage we're at fault! It's always somebody else to blame, not their stupid politics and of course not socialism! Blame the US, blame the banks but not the morons cheering when their own leaders were setting up programs that were going to ruin the country.

If this traditional economy is this bad why are some countries doing so good compared to Venezuela without a single drop of oil?