Venezuelans Shifting from the Dollar to Cryptocurrency – Report

Venezuelans are increasingly “turning to crypto” as an alternative to the US dollar in an effort to combat inflation, according to a recent report.

As reported by El Pais, “digital” currencies are now replacing the “grey dollar” for residents of Venezuela.

Venezuelans Remain Interested in Crypto

The author of the report observed that although the “crypto accepted here” signs that were once common in shops, hotels, and restaurants in Venezuela have largely vanished, “this does not imply that Venezuela’s crypto economy is not thriving.”

The media outlet noted that Venezuelans are increasingly utilizing Bitcoin (BTC) and other cryptocurrencies for simple transactions, receiving remittances, and “seeking refuge from the depreciation of the [fiat] bolivar.”

The publication added that while crypto exchanges are “not illegal” in the country, they are also “unregulated.”

The government of Nicolás Maduro reportedly “tolerates” unregulated crypto exchanges “because it has become a means to bring foreign currency into the country.”

The Venezuelan President Nicolás Maduro with the late US President Jimmy Carter. (Source: Nicolás Maduro/Facebook)

Maduro claimed victory in elections earlier this year. However, the United States has asserted that the elections were tainted by “electoral fraud.”

As a result, the newspaper explained, Maduro’s inauguration on January 10, 2025, has become “a date that is generating political and financial tension.”

Maduro previously adopted a strongly pro-crypto stance and even led the launch of a state-operated cryptocurrency, the Petro (PTR).

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Mass Arrests

However, this policy succumbed to widespread corruption, resulting in mass arrests and the eventual shutdown of the PTR.

Nonetheless, Maduro has recently expressed intentions of “returning” to the crypto “path.” The blockchain analysis firm Chainalysis reported that “in the second quarter of 2024,” the Venezuelan markets for Bitcoin, Ethereum (ETH), and USDT expanded by “an impressive 110% compared to the same period last year.”

Chainalysis claims this growth rate is “higher than in any country in the [LATAM] region.”

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$20 Billion Influx

The media outlet reported that in 2024, an “estimated amount of $20 billion” has “entered the Venezuelan ecosystem” through crypto markets.

This constitutes a significant portion of the country’s estimated $100 billion Gross Domestic Product for 2024.

Despite its well-documented financial challenges, Venezuela has managed to combat hyperinflation to some extent.

However, the economy remains heavily reliant on oil exports, and the threat of inflation continues to loom. Inflation increased by approximately 4% in October, rising from below 1% in September.

Some estimates suggest that November saw an even sharper increase.

Venezuela’s monthly inflation rate returned to double digits in November: 12.5%, a figure not recorded since the beginning of 2023, according to the Venezuelan Financial Observatory (OVF). pic.twitter.com/l3rNCbxZPj

— BowTiedMara (@BowTiedMara) December 6, 2024

This situation, similar to trends in other LATAM countries, has driven many citizens toward stablecoin markets.

Chainalysis reported that between July 2023 and July 2024, 47% of crypto transactions under $10,000 involved stablecoins.

“Stablecoins have become popular because they are pegged to more stable fiat currencies, such as the US dollar. They provide a hedge against the volatility of the Venezuelan bolivar. […] They play a crucial role in daily transactions and remittances.”

Dan Cartolin, Business Account Executive, Chainalysis.

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Criminal Risks?

The newspaper quoted a Venezuelan citizen named Vanesa, who explained that she provides crypto exchange services to her fellow citizens using platforms like Binance.

However, Vanesa expressed concern that the crackdown on crypto exchanges and the government’s own crypto operations have left individuals like her in uncertainty.

The publication cited an unnamed Latin American crypto exchange stating that it had attempted to apply for a digital asset service provider license in Venezuela.

However, this platform indicated that it had abandoned the effort due to “impossible to manage sudden changes” in the regulatory guidelines.

Following the crackdown, crypto-related “posters” have been “removed” everywhere. Operations involving crypto are “becoming more discreet,” Vanesa added, concluding:

“Everything is in the gray zone here. It’s impossible to know if I’m laundering someone’s money [when I am exchanging crypto for clients].”

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