The Bitcoin and cryptocurrency world has been closely watching Venezuela over recent years as the socialist country grapples with an economic crisis that has plunged people’s lives into chaos.
Now Venezuelan President Nicolas Maduro has broken new ground in his efforts to stabilize the country’s economy: lopping five zeros off the bolivar, introducing new bills, a name change and linking the new bolivar’s value to the national oil-linked petro cryptocurrency.
The official rate for the currency will go from around 285,000 per dollar to 6 million while the minimum wage will be raised some 3,500% in an effort to offset the devaluation shock.
The historic devaluation and changes to the currency mean the new minimum wage will be 1,800 sovereign bolivars, instead of 1.8 million old bolivars.
Meanwhile, Bitcoin and cryptocurrency use in Venezuela has remained far above other countries, with transaction volumes climbing since the beginning of this year, according to peer-to-peer exchange LocalBitcoins.
There are fears amongst the country’s citizens that things are only going to worsen as oil production, effectively the country’s sole industry, has plunged amid a shortage of equipment and technical expertise.
Last month, the International Monetary Fund warned Venezuela’s economy is expected to contract by around 18% in 2018, while inflation is forecast to reach 1,000,000% — making Venezuela one of the worst hyperinflationary crises in modern history.
“We are projecting a surge in inflation to 1,000,000 percent by end-2018 to signal that the situation in Venezuela is similar to that in Germany in 1923 or Zimbabwe in the late 2000’s,” Alejandro Werner, director of the IMF Western Hemisphere department, wrote in a post on the agency’s blog.
People in the country are struggling with the level of inflation, which is making it hard to pay for everyday things and many are opting to use Bitcoin and cryptocurrencies.
“Cash is almost useless as a method of payment,” one Venezuelan citizen, who wished to remain anonymous, said ahead of the weekend’s currency changes. “The biggest bill is 100,000 bolivars, which cannot be used to pay for anything. A small coffee is almost two million bolivars.”
Cash is only used to pay for public transportation, gasoline, and tolls, according to the Caracas resident: “It is chaos!”
“While people are often keen to use alternative methods of payment, it is not easy to find stores that accept Bitcoin or cryptocurrency as legally you only can accept bolivares. There are there are some places I know that accept the cryptocurrency Dash as a form of payment, however.”
Elsewhere, Randy Brito, a Venezuelan whose family moved to Spain in 2004 due to the worsening economic situation, has been speaking about his non-profit organization BitcoinVenezuela.com which tries to educate people in the country about Bitcoin.
“I’ve been educating about Bitcoin in Venezuela since 2012, in our website, in social media, with collaborators in the country who gave talks, supporting local groups teaching about Bitcoin there, running campaigns, giving interviews, podcasts. Besides trying to educate about economics, fighting Socialism both in Venezuela and Spain,” Brito said via a Reddit Ask Me Anything, yesterday.
“We believe in turning BTC to a common medium of exchange in the country,” Brito said in response a Reddit user question.