Though Bitcoin is less than ten years old, the world slowly understands how it can help the world in terms of transactions. However, one of the things that is yet to be proven is the utility of cryptocurrencies. Does it really have a function? Bitcoin has even been considered as the modern gold as a safe haven for assets.
For countries that have suffered from serious economic problems, cryptocurrencies have become an alternative to fiat. Venezuela is a good example of such. This Latin American country has embraced crypto technology even having their own state-backed cryptocurrency called Petro. Petro is supposedly backed by Venezuela’s oil.
And not only that, because of hyperinflation, Venezuela declared that it is going to have its new currency backed by Petro. The question remains if this will be able to help save Venezuela’s economic crisis?
President Maduro even imposed a decree that Petro will be used as the second unit of account in the country. In late August, Maduro mentioned that “Venezuela will have a second accounting unit based on the price, the value the petro”. He also added that “It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry”.
However, there are already criticisms towards the cryptocurrency. There are those questioning where the oil is coming from.
But one thing is for sure, Venezuelans are slowly transitioning towards cryptocurrencies rather than their own currency. It has already been reported that Dash has been used by businesses. And also, there are those who are already mining Bitcoin taking advantage of the price freeze on basic commodities such as electricity.
Rise of Bitcoin Utilization
Coin Dance reported that Venezuelans traded nearly 300 million bolivars worth of bitcoins last week alone. It has broken the previous record of more than 292 million bolivars traded.
Hyperinflation has caused a lot of problems for Venezuela. It is a combination of overreliance to oil, not to mention US sanctions against the country. It has resulted in reports of Venezuelans fleeing the country going to other parts of Latin America. According to the numbers provided by the International Organization for Migration, since 2015, around 1.6 million have already left the country. Among options that Venezuelans choose to migrate to include Colombia, Peru, Brazil, and Argentina.
On August 10, five zeroes were stripped from the country’s currency. However, it hasn’t solved the inflation rate problem even if there is a new Venezuelan currency.
Will This Be a Trend?
Did Venezuela set a trend? It has been reported that Iran is planning to have its own national cryptocurrency. In April, Iran has been developing an experimental domestic cryptocurrency with the same purpose to fight US sanctions. This was after Trump administration decided to pull out of the Iran nuclear deal and even given more sanctions on Iran. By November, buying crude oil from Iran will already be prohibited.
Iran’s central bank has welcomed cryptocurrencies and even experimented on Bitcoin as a solution when it comes to international payments. However, due to the volatility of cryptocurrencies, Iran’s Central Bank also had their hesitations considering the possibility of capital flight.