Bitcoin and cryptocurrency adoption soar in Venezuela
Chainalysis published its study on the use of Bitcoin in Venezuela on Thursday, which is part of its next “Geography of Cryptocurrency Report 2020”.
“Venezuela is going through one of the worst economic crises in modern history, with its national currency, the bolívar, becoming practically worthless,” wrote the company. “In these circumstances, cryptocurrency has taken on an important role in Venezuela’s economy… As the Venezuelan bolivar lost value in the midst of hyperinflation, Venezuela has become one of the most active countries in the cryptocurrency trade on the planet.” The company elaborated:
“The country has achieved one of the highest rates of cryptocurrency use in the world, ranking third in our Global Crypto Adoption Index, as many Venezuelans rely on cryptocurrency to receive remittances from abroad and preserve their economies against hyperinflation.”
Most crypto activity in Venezuela is driven by point-to-point exchange (P2P) activity, specifically at Localbitcoins, Chainalysis noted. “Venezuela is the third most active country on the platform, or the second most active when we scale it by the number of internet users and per capita purchasing power parity. Venezuela occupies the 3rd place in volume of P2P trade in dollars, after the USA and Russia. ”Venezuelans are also using the Bitcoin.com P2P market to buy and sell Bitcoin in cash.
Venezuela’s P2P volume in dollars and bolivar during the period between July 2019 and June 2020. Source: Chainalysis
Chainalysis also discussed Venezuela’s national cryptocurrency, Petro, launched by “the country’s contested government, led by Nicolas Maduro, sanctioned by OFAC and known for its corruption and human rights abuses”. In May, the United States a $ 15 million reward in Maduro and accused several senior Venezuelan government officials of “narcoterrorism, corruption, drug trafficking and other criminal charges”.
The National Superintendence of Cryptoactives and Related Activities (Sunacrip) is the regulator of crypto activities in Venezuela. So far, seven cryptocurrency exchanges have been licensed to market Petro. According to the Maduro government, Petro adoption has increased significantly. Recently, 305 Venezuelan municipalities agreed to collect taxes in Petro.
One of the approved exchanges is Criptolago. According to financial intelligence provider Sayari, the exchange belongs to the Venezuelan state of Zulia, with the state governor, Omar Prieto, in a senior management position. “Prieto is a staunch ally of Maduro who is personally subject to U.S. sanctions for refusing to deliver humanitarian aid,” Chainalysis said.
Last year, Criptolago addresses received more than $ 380,000 in Bitcoin on 3,916 transfers and sent more than $ 360,000 on 2,297 transfers. Although the volume of transfer of the platform has grown more than 13 times in the past year, “it does not appear that Criptolago is helping Venezuelans with more difficulties”, says Chainalysis.
The company pointed out that crypto transactions worth $ 1,000 or more represented more than 75% of the total transfer volume, but “the average Venezuelan earns only 72 cents a day, which means that few of them could pay for these transfers”. In addition, the total number of transactions was less than 1,000 per month.
An expert in Venezuela told the company that “Criptolago’s transaction activity suggests that the platform can be used mainly by individuals linked to the Maduro regime who seek to launder funds or withdraw them from Venezuela.” However, Chainalysis stated:
“We have a lot of anecdotal evidence that people in Venezuela are increasingly interested in cryptocurrencies.”
“This fits in our interviews with cryptocurrency experts in Latin America – users not only in Venezuela, but in other countries facing adverse economic conditions, resort to cryptocurrency to preserve their economies in the face of currency devaluation,” emphasized the company.