Amid growing economic chaos, and the highest inflation rate in the world, some Venezuelans are swapping bolivars for bitcoins in order to buy basic necessities or pay their employees
The digital currency is free from central bank or government controls, and users in Venezuela see it as a safe alternative in an economy where the government has enforced strict foreign exchange controls, and inflation is running at an estimated 500%.
This week, Venezuelans rushed to unload 100-bolivar bills – the largest denomination – after the government announced that it would be withdrawn from circulation on Wednesday in what it described as a move against profiteering.
Although Bitcoin users still represent a tiny minority, some believe that the currency will become more popular in Venezuela as economic uncertainty escalates.
Unlike other online payments, the peer-to-peer currency does not require any third party to buy, sell or send. Venezuelans only need a phone, computer or on an online wallet service to store bitcoins which they can exchange at the black-market dollar exchange rate – almost five times the official exchange rate.
There are no official statistics on the number of bitcoin users in the country, but according to the brokerage website Surbitcoin.com – a platform allowing Venezuelans to buy and sell bitcoins in exchange for bolivars – the number of users has increased from 450 in August 2014 to more than 85,000 in November 2016.
“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 Jorge Farias, the CEO of another exchange platform, cryptobuyer.io.
Farias said that some use the currency to by food or medicine, while Venezuelans abroad use it to send funds to their families.
Some use bitcoins to buy Amaon gift cards, then order goods and food on the online store in the US and other countries, which can then be delivered by courier to Venezuela – where supermarket shelves are frequently empty.
Others use the currency as safe haven for their savings. “I save in bitcoin and when I need money, I convert it into bolivars, I just changed 0.14 bitcoin and that was enough to live for quite some time,” said Lili Beth Grela, who runs Cryptobuyer’s finance department.
Although bitcoin itself has been prone to volatility in the past four years, it remains relatively stable compared to the bolivar, which depreciated 60% against the US dollar on the black market in November, according to the US-based website Dolar Today, which provides a benchmark exchange rate.
In mid-2014, one bitcoin was worth about 40,000 bolivars, which then amounted to $630. One bitcoin is now worth less than 2m bolivars at the time of writing, according to Surbitcoin.
Farias says that many Venezuelan tech workers who freelance for companies elsewhere prefer to be paid in 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,” he said.
On the other hand, “buying bolivars with bitcoins is the easy part because a lot of people have lost trust in the bolivar and will take bitcoins instead,” says Surbitcoin.com CEO Rodrigo Souza.
To buy bolivars with bitcoins, people either use peer-to-peer service, like LocalBitcoins, to trade in person. They can also use an exchange brokerage, such as where they can convert their bitcoins into bolivars and vice versa.
Venezuela’s political and economic turmoil has in turn triggered a health crisis with the collapse of its healthcare system, and acute shortages of drugs and medical supplies.
One user, Eli, a 33-year shoe store owner, said he uses the digital currency to buy medicine for his mother’s bone cancer. He sells bitcoins to a friend in Colombia who buys cancer treatment and medical supplies when he comes to visit.
“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 debts, so bitcoins enabled me to stay afloat while our currency is collapsing,” said Eli.
Another bitcoin user, Arley from the Táchira state on the border with Colombia, said he buys drugs in Colombia with bitcoins, then resells them after legally importing them to Venezuela.
The currency occupies a legal grey area in Venezuela: while in the US it is deemed a commodity, “there are no laws against or in favor of bitcoin in Venezuela. With this loophole, bitcoin could be considered a digital good, which would make it legal to buy and sell,” he said.
But, fearful of potential retribution from the government, most Bitcoin users in Venezuela keep a low profile, restricting their discussions of currency to encrypted communications apps such as Telegram.
“We’re afraid because there has been a foreign exchange control in Venezuela for years so we don’t want to openly talk about changing bolivars into another currency, especially not at the black-market exchange rate,” said Carlos, a bitcoin user from Anzoátegui state.