Venezuela’s national currency Bolivar Fuerte is rapidly losing value amidst hyperinflation. The official FX value of the Venezuelan bolivar is $1 to 9.95 VEF but in actuality, in the country’s black market, local residents are paying around 5,000 VEF for $1. To avoid the devaluation of bolivar and acquire necessary daily goods, Venezuelans have started to rely on Bitcoin to finance their expenditures.
By local exchange rates, 100 bolivar is equivalent to $0.02. The country’s highest denomination banknote was 100 bolivar, but the government demonetized it earlier this week. As a result, the Venezuelan economy and monetary system experienced turmoil as people struggled to obtain cash to finance daily living.
Currently, the largest denomination banknote is the 50 bolivar note, which is worth $0.01. So, for Venezuelans to purchase a slice of bread or lunch, they will need 200 of the 50 bolivar banknotes to purchase lunch at around $4. Nathan Crooks, Bloomberg News chief in Venezuela, revealed that people carry stacks of cash in order to purchase basic goods like food, toiletries, etc.
Why people are switching to Bitcoin
Bitcoin as a decentralized currency offers high liquidity, stable global exchange rates and most importantly, transportability. Even if Venezuelans purchased US dollars on the local black market, currency controls in airports and borders make it virtually impossible to carry foreign currencies outside of the country.
With the Venezuelan bolivar declining in value on a daily basis, local people are seeking assets or currencies like Bitcoin that can be used online to deliver food into the country. Through the use of Bitcoin, Venezuelan residents and travelers are accessing e-commerce platforms like Amazon to order and deliver food into the country.
While major platforms don’t accept Bitcoin directly, there are services like Purse that enable anyone to purchase items on e-commerce platforms with the digital currency.
“Bitcoin is mainstream neither in Venezuela nor in the world but there is a growing interest in the technology. More and more people from different industries are getting on board,” said Cryptobuyer CEO Jorge Farias.
Cryptobuyer is a Purse.io-like platform which enables users to purchase goods like food or other products with Bitcoin.
“With Cryptobuyer, we convert Bitcoins into bolivars and help Venezuelans pay for daily life necessities, such as mobile phones recharges, television, water and electricity bills as well as banks transfers in bolivars,” said Farias.
Another Bitcoin user in Venezuela interviewed by the Guardian stated that he relies on Bitcoin to acquire medicine necessary to treat his mother’s bone cancer. He told the Guardian that he purchases Bitcoin through a local Bitcoin exchange and sends it to his friend who buys the necessary cancer treatment and medicine.
“Treating my mother’s cancer would have been very difficult without using Bitcoins because my business is going bankrupt and I have a lot of debt, so Bitcoins enabled me to stay afloat while our currency is collapsing,” said Eli, a 33-year old shoe store owner.