President Nicolas Maduro’s regime in Venezuela has seen the bolivar plummet in 2016, losing close to 50 per cent of its value against the US dollar, and inflation spiral, with 15 recorded rises over a 12 month period. An unstable currency has rocked the economy, and reduced people’s faith in wages and prices, since the notes they use devalue almost as soon as they have been pocketed. The future does not look any brighter, for the IMF has forecast a consumer-price inflation rate of 480 per cent by January 2017, rising to a staggering 1640 per cent in 2017.
One of the consequences of this continuous fall in the value of the bolivar is the spiralling rise in the black market exchange rate for US dollars. The official rate, set by the government, is 9.95 bolivar for each dollar; in reality, people are paying around 1800 bolivars for every dollar they buy as of today.
Source: www.venezuelaecon.com
Given the fact that the bolivar lost 60 per cent of its value in four weeks in 2016, it is perhaps unsurprising that some Venezuelans have chosen to change their bolivars into bitcoins, considering the latter a relatively stable form of currency - and one which has been holding and indeed increasing in value throughout 2016. This reaction to a failing national currency is not limited to Venezuela, for while bitcoins cannot be classified as a totally non-volatile form of currency, which has prevented them from being used widely worldwide, their fall in value cannot compare with that of the bolivar. However much the bitcoin might fluctuate in value, this will not compete with the radical downward spiral of the Venezuelan state currency.
Diario Bitcoin reports that the first week of August saw 141.7 million bolivar changed into bitcoins, the equivalent of 141 million USD. This was up on the previous week’s figures, which recorded 117.116 million bolivar being changed to bitcoins, the equivalent of 117 million USD.
REMITTANCES:
In 2005, both Moneygram and Western Union reacted to government regulations and sanctions by withdrawing from Venezuela. As a result, many families were no longer able to receive financial support from outside Venezuela. This gap in the market is gradually being filled by three bitcoin exchanges which have been set up: the first was SurBitcoin, and this has now been supplemented by the newer Yabit and Cryptobuyer. Thanks to these payment networks, it is now possible to send funds into the country. Unlike central government in neighbouring Ecuador and Bolivia, the Venezuelan authorities have not regulated the use of bitcoin, mainly because it is not considered a currency, but a form of property. Local legislatures, which deal with money transactions did, however, question SurBitcoin closely once it was launched, to determine whether its function was to launder money illegally.
To date, the Maduro government has not intervened and we can but hope that the introduction of bitcoin and other cryptocurrencies will succeed in providing Venezuelans with the financial power and tools people need to safeguard their economic future, nevertheless it provides oxygen to a suffocating economy.
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