In Venezuela, cryptocurrency use is common amid hyperinflation. Binance, a global crypto exchange, appears to be gaining ground in the nation.
US sanctions disrupt Venezuela’s economy on a daily basis, and cryptos have become a tool to send remittances and protect wages from inflation.
Tokens also help businesses manage cash flow in a quickly depreciating currency.
According to a startup that researches blockchain transactions, Chainalysis, Venezuela is ranked third on its Global Crypto Adoption Index in a 2020 report because of the high volume of Bolivar transactions.
Crypto is used as a way to protect savings in case inflation causes bank deposits to sharply depreciate in value over a period of weeks, or even days.
High Volume of Bolivar Transactions on Crypto Exchanges
The world’s largest cryptocurrency exchange, Binance, which offers to trade a variety of tokens, is rising in popularity in Venezuela.
Stablecoins are the common choice with values that remain steady against specific assets such as the US dollar. These tokens avoid the volatility that many cryptocurrencies display.
According to Binance, Bolivar operations on its peer-to-peer platform have risen by 75% since May, making Venezuela the only Latin American country whose trading volumes have risen since Bitcoin prices tumbled at the start of May.
Crypto Is Filling the Gaps of Venezuela’s Economy
In 2017, Venezuelan President Nicolas Maduro announced the creation of the state-backed petro cryptocurrency.
The government used it in 2019 to make small payments to retirees and as a unit of value to price services or fines that are ultimately paid in bolivars.
According to Aaron Olmos, an economist and finance expert, a major part of Venezuela’s crypto operations involves businesses swapping out of Bolivars to beat inflation.
“Crypto is being used as a palliative for the economic situation, but you see it mostly among businesses…Nobody is going to tell you ‘every night when we do the books, we convert bolivars into bitcoin,’ but yes, this is happening.”
Although banks can still deal with private businesses or individuals after sanctions by the US since 2019, many avoid doing so due to perceived regulatory risk.