Caracas. Venezuelan food delivery man Pablo Toro is not involved in cryptocurrency trading and has no ties to blockchain platforms, but indirectly uses digital tokens every time he sends money to his family.
Toro, who immigrated to Colombia in 2019, uses an app called Valiu that receives the Colombian pesos he earns working on the streets of Bogota and then deposits the bolivar into a Venezuelan bank account.
For the Venezuelan economy, mired in hyperinflation and surrounded by sanctions, the process is not so simple. Valiu uses peso to buy cryptocurrencies which he then sells on LocalBitcoins, a global site that facilitates the trading of digital tokens for local currencies.
For Toro, the platform is more reliable than informal money changers, the main channel that Venezuelan immigrants use to send money home. And you don’t need the traditional shipping that you have to buy in person.
Operations in Bolivar on the LocalBitcoins platform are the largest in terms of the value of Latin American currencies, according to data from the company, analyzed by blockchain consultant UsefulTulips.
“When there’s no electricity (in Venezuela), when there’s no internet, it affects a lot about the time it takes to send remittances or financial aid to the family,” said Toro, who quit his job as a security guard because “there’s no electricity (in Venezuela), when there’s no internet, it affects a lot of time.” With his salary he could not even buy food today.
Now, “I shouldn’t have known whether the signal went down in Venezuela or whether the signal went down here.”
As hyperinflation and US sanctions leave the Venezuelan economy increasingly dysfunctional, cryptocurrencies have emerged as a way to provide services that the traditional banking system does in other countries.
It has become a tool for sending remittances, protecting wages from inflation, and helping companies quickly manage cash flow in the face of depreciation, according to interviews with crypto users and experts.
Cryptocurrency use in Latin America gained new attention in June after El Salvador adopted bitcoin as legal tender. In addition, it has gained popularity in Argentina in response to the return of inflation.
In a report published in 2020, Chainalysis, a startup investigating blockchain transactions, ranked Venezuela third in its global Crypto adoption index, a ranking largely driven by large transaction volumes in the bolivar.
Cryptocurrency mining, which uses high-powered computers to solve complex math problems, is an attractive way to generate additional income in the face of extremely low energy prices in Venezuela, but the average citizen cannot afford the equipment.
“Valiu buys and sells bitcoins rather than directly exchanging pesos for bolivars due to the unavailability of this currency in regulated markets,” said Alejandro Machado, Valiu’s Head of Experimental Programs.
Operations in Bolivar on the LocalBitcoins platform are the largest in terms of the value of Latin American currencies, according to data from the company, analyzed by blockchain consultant UsefulTulips.
LocalBitcoins did not respond to a request for comment.
Cryptocurrency traders and experts say trading volumes on the site have decreased due to the growing popularity of Binance, one of the world’s largest cryptocurrency platforms, which offers trading in a variety of tokens.
These include the so-called “stable currencies”, the values of which remain unchanged relative to a particular asset, such as the US dollar.
Bolivar trading on Binance is up 75% since May, making Venezuela the only Latin American country to have increased trading volumes since bitcoin prices began dropping sharply in recent weeks, according to a spokesperson for the platform.
Venezuelan President Nicolas Maduro announced in 2017 the creation of a state-backed cryptocurrency called Petro, but it has very few practical applications.
Thus, an important part of crypto operations in Venezuela involves companies changing bolivars to combat inflation, said economist and financier Aaron Olmos.
“Cryptocurrencies are being used to mitigate the current economic situation,” Olmos said. “No one is going to tell you ‘Every night we balance the cash, we pass the bolivar to bitcoin.’ And yet, it does.”
