Venezuela’s economy is highly dependent on oil production and exportation. As global oil prices saw a severe decline in 2014, the economy of the country entered a destructive spiral which has continued till date. The value of the national currency has depreciated by a huge margin, hyperinflation is becoming a severe issue. But in this chaos, cryptos have emerged as the savior for the Venezuelan people.
Hyperinflation occurs when the price of the local currency of a country depreciates in value and people start opting for foreign currencies. After oil prices plunged across the globe back in 2014, Venezuela’s economy broke down with the Central Banks monetary reserves getting depleted. Prices of various goods spiked up and as the native currency depreciated, people started to look for alternative foreign currencies. This forced people to shift their focus on cryptocurrencies. People started to use cryptos in order to make their payments as the local currency went down the drain. One of the leading cryptocurrencies of the world, Dash, gained a lot of popularity in the country.
As stated by the CEO of Dash Core Group, Ryan Taylor, while talking to BlockPublisher:
“In Venezuela, we’ve got greater crypto acceptance than all other cryptocurrencies combined. We’ve got around 2,500 to 3,000 merchants. You can actually live off dash in Venezuela.”
Seeing the rise of crypto adoption, the government of Venezuela also decided to launch its own cryptocurrency that goes by the name of Petro. Petro is an oil-backed cryptocurrency that was launched back in February of 2018. Petro is aimed at becoming the dominant digital cryptocurrency in the country with the government’s push but other cryptos are not holding back either. Since cryptos like bitcoin, ethereum, litecoin etc. are global and are not controlled by any state, as opposed to Petro which is oil-backed and is prone to the price depreciation of oil across the globe, they are more favored by some.
The government of Venezuela has also recently announced a crypto remittance service that goes by the name of Patria. The service will allow the citizens of Venezuela to settle payments with others in bitcoin and litecoin from across the globe. Conditions are also put in place by the governments regarding this service. But overall, this news comes off as a sigh of relief for the people in Venezuela who were previously threatened to use the native cryptocurrency Petro.
The Venezuelan case is one of the prime examples of how cryptos can help fight the problem of hyperinflation in a country. As the local economic system of a country breaks down, cryptocurrencies can step in to take the charge. We are already seeing countries like Iran and Zimbabwe struggle with their native economic frameworks. Fiat currencies are centrally controlled by the state banks and hence resource depletion can cause serious problems. Cryptos help solve this issue as they are decentralized. They are not controlled by native banks and their prices are globally uniform.
Hyperinflation is real. Cryptos use case and potential are also real. Venezuela just gave us the first live demo of crypto usage on a nationwide scale. With the way many economies are across the globe, it is quite possible that cryptos will get more mainstream adoption. It only seems to be a matter of time before cryptos get more mature and countries start integrating them into their native economic frameworks.