Wednesday, April 8, 2020

Venezuela’s crypto adoption: Is it the devil in disguise?

The Takeaway:

Bitcoin has been a knight in shining armor for the economy of many nations. Venezuela turned to bitcoin when its traditional currency began to appall the economy of the country. Now, the Government is testing to hold bitcoin and ethereum in its basket of international reserves. Will this move of the Venezuelan authorities REKT the crypto world?

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The central bank of Venezuela is running internal tests to conclude whether it can hodl Bitcoin and Ethereum in its crate of international reserves. As per the reports, Petroleos de Venezuela SA, the country’s state-owned oil and natural gas company has proposed the use of digital cash to pay its suppliers. 

 

Venezuela embraced Bitcoin during Economic freefall

The country turned to bitcoin in the time of hardships when their own fiat money was failing. The use of BTC soared since.

Although the Bitcoin adoption might seem to be a savior move, it has its hurdles. Firstly, using BTC and ETH to support international trades would be a challenge. Anyone willing to trade with Venezuela would have to comply with the KYC policies established by any exchange or OTC desk, which, in numerous cases, are directed by the laws of the United States or other countries impacted by US policies.

Secondly, a Venezuelan lawyer, Ernesto Portillo, stated that cryptocurrencies perform the functions of the traditional money, attaining a store of value, an accounting unit, and a method of payment; but it must be noted that Bitcoin holds a mining limit. The authorities cannot manipulate their supply or assign it a rigid value. Thus, the requirement of fiat currency will subsist. 

 

Did the United States hit Venezuela’s raw nerve? 

The imposition of sanctions related to terrorism, drug trafficking, oil and gold sectors, and more on Venezuela by the US has paved a disruptive path for the nation to step complete foot into the global financial system. Currently, the country is suffering from immense hyperinflation. According to reports, the overall inflation rate in April 2019 was 282,973%. The dynamic of inflation has forced over 30 million Venezuelans to emigrate. 

 

VERDAD – the Petro verdict

In 2018, witnessing the crypto boom, the country inaugurated its own coin. Venezuela introduced the world to Petro, a cryptocurrency backed by the nation’s vast oil reserves, hoping for its success to be synonymous to bitcoin. However, the currency failed to gain attention in good deeds and rose as a crime against humanity. The US authorities have executed VERDAD – The Venezuela Emergency Relief, Democracy Assistance, and Development Act that seeks to ban the citizens and organizations from holding, trading, buying, and spending the Venezuelan Petro. If the law passes, it will make history as it would be the first-ever ban on any cryptocurrency

Did Venezuela mine bitcoin in the dark?

How the Venezuelan Government possesses the crypto stash appears to be a blur; however, if we look into the possibilities, the traces of illicit acts might stand to support the possession. Powerful hydroelectric generators available in Venezuela provides it with some of the cheapest electricity in the world. So, did the government program illegal bitcoin mining to circumvent the sanctions? 

A twitter user highlighted the probabilities.


Did the ban of Petro birth a rebel? Or is it the tactic of the corrupt nation to influence a ban on Bitcoin?

Crypto on-lookers took center stage on social media, linking this adoption to the arrival of a bearish trend in bitcoin. 

What do you think this crypto adoption beholds for the crypto nation? 

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Disclaimer: The article reflects the opinions of the author and is not representative of Chaintimes’ views.
The article does not offer any investment advice. User discretion is advised when investing in or trading with cryptocurrency. Extensive and diligent research should be carried out by the reader before making a decision.

Glenn Harper
Glenn Harper
Glenn has only two interests: Bitcoin and Aviation. After completing his graduation from San Diego State University in 2006, Glenn started working in the airlines and aviation industry. Aviation was his only passion before he came to know about bitcoin in 2012 after which he decided to dedicate 8 hours of his day for aviation and 8 hours for learning and writing about bitcoin and the technology behind it. Glenn lives with his wife and a 7-year-old son who mines ethereum on his computer and is also quite passionate about cryptocurrencies.

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