Strict State Control Over Currency Turning Venezuelans to Bitcoin

In Venezuela, the State's strict monetary control makes it a real challenge for locals to obtain dollars, or make a simple purchase on the Internet. To overcome this difficulty, Venezuelans are turning to Bitcoin for practical reasons, but also to manifest their discontentment towards the system.

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Strict State Control Over Currency Turning Venezuelans to Bitcoin

In Venezuela, the State's strict monetary control makes it a real challenge for locals to obtain dollars, or make a simple purchase on the Internet. To overcome this difficulty, Venezuelans are turning to Bitcoin for practical reasons, but also to manifest their discontentment towards the system.

Many experts have already discussed the potential of digital currencies in Latin America. In fact, CoinDesk's new Bitcoin Market Potential Index shows that among the top 10 countries likely to see mass adoption, 3 are Latin Americans: Argentina, Venezuela and Nicaragua; and according to experts, this argument can be explained by the region's highly volatile government-backed currencies, strict capital controls, and expensive remittance fees.

Thus, many Venezuelans believe Bitcoin can overcome their country's economic limitations.

Introduced by former president Hugo Chavez, Venezuela's strict currency controls imply locals to either request fiat currencies to the State, which is already struggling to satisfy demand, or recourse to the black market.

Venezuela people

Caracas-based software developer John Villar, said he discovered Bitcoin's true utility while trying to make a purchase on Amazon, reported Reuters. While finding himself unable to pay in US dollars for a US$10 cell-phone battery, Villar decided to buy bitcoins from a friend with Venezuelan bolivars and purchased an Amazon gift card using his bitcoins. According to Villar, Bitcoin does not only enable Venezuelan individuals to access foreign markets; the digital currency is also "a way of rebelling against the system."

Another individual who demonstrates a similar Government-rebellious mindset, is University of Tachira's graduate business school teacher Gerardo Mogollon. Mogollon, who calls himself 'Dr. Bitcoin Venezuela,' is also a public speaker that makes recurrent online video appearances where he evangelizes Bitcoin and urges locals to adopt the digital currency. He told Reuters:

"I'm teaching people to use Bitcoin to bypass the exchange controls."

In parallel, Venezuela's first Bitcoin exchange SurBitcoin, will hopefully start trading this week, said Venezuela-born brothers Kevin and Victor Charles, SurBitcoin's founders. Announced on August 15, SurBitcoin uses BlinkTrade's open-source exchange platform, and while still in beta version, Venezuelans can already register on the platform.

Bitcoin Market Potential Index

While Bitcoin has long been criticized to be highly volatile, the digital currency's price fluctuation does not impress Venezuelans who saw inflation reach 142% between 2013 and 2014. Last year, Venezuela's bolivar dropped nearly 60% versus the US dollar on the black market; and it is worth noting that black market dollars are being sold 16 times the highest government-fixed exchange rate. 

In recent months, Bitcoin has attracted mainstream demographics, and according to Nicolas Cary, CEO of Blockchain.info: "Bitcoin makes a lot of sense in emerging economies like Brazil and Argentina and Russia." The executive told Yakima Herald:

"The number of new sign-ups we see in Latin America is increasing. [We] are moving beyond the people placing bets to people seeing value."

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