The change to make Venezuela a crypto-centric economy seems to be working, but not in the way the government had hoped for.
The Venezuelans Switch More to Crypto
A recent Latin America study by blockchain analytics company Chainalysis has reported that Venezuela currently ranks third globally in terms of digital currency adoption. Just Ukraine and Russia are behind the nation when it comes to crypto adoption.
However, peer-to-peer markets are the key reason that Venezuela is ranking so high at the moment, according to Chainalysis research led by Kim Grauer. She added that the new data were a warning of a world plagued by hyperinflation, causing people to turn to Bitcoin (BTC) as a safe haven. People get their BTC from P2P crypto exchanges, including LocalBitcoins and Paxful.
As the P2P exchanges gain momentum, the government-approved exchanges in Venezuela find it difficult to survive. This is evident from Criptolago, one of the seven government-approved exchanges that produced only $380,000 in dollar-adjusted volume over the past year. On the other hand, since this time last year, LocalBitcoins has reportedly produced $242 million in bolivar-to-bitcoin trading volume. Paxful suspended payments through the Bank of Venezuela in June of this year due to U.S. sanctions but still managed to report $311,000 in Bolivar-to-BTC value over the past year.
Cryptocurrencies for Safe Haven
The study indicated that Criptolago is the most commonly used elite in the country as they use the site to save their wealth in cryptocurrencies. The experts added that some elite could also use the forum to circumvent sanctions. Data reveals that the volume of BTC move to Criptolago in July 2020 was 13 times higher than the amount at the same time in 2019.
In a nation marred by hyperinflation and never-ending political instability, government-approved cryptocurrency exchanges are obviously not citizens’ first option. This revelation was not shocking to the regional experts who had participated in the Chainalysis study. Venezuelans are afraid of taxation, government, fees, and surveillance, Grauer added. People lack trust in the government of Venezuela, even though they believe in bitcoin and other cryptocurrencies.