In the year the COVID-19 pandemic disrupted almost every aspect of our lives for the first time, many things have happened in the crypto ecosystem around the world. How was the past year for crypto in Venezuela?
Even before 2020, there were a number of companies in Venezuela that accepted various cryptocurrencies as a means of payment. In the past year, however, significantly more people have opted for this payment method. This includes everything from the hotel industry to the famous pizza chain Pizza Hut, which announces it will accept Bitcoin (BTC), Litecoin (LTC), Dash and other cryptocurrencies as payment.
In mid-2020, Cryptobuyer and payment processor Mega Soft announced that they would form an alliance that would allow around 20,000 merchants who use their services to accept payments in crypto via the Cryptobuyer Pay solution developed by the exchange.
Another important milestone was in September 2020 when a Bitcoin node was connected to the Blockstream satellite network – a first for Venezuela. As a result of a joint effort by Cryptobuyer and crypto education provider AnibalCripto, the node was launched despite the logistical constraints imposed by COVID-19-related lockdown measures. Those in charge of the node also announced that this would be the first step in building a mesh network that could process Bitcoin transactions without an internet connection.
Despite the ongoing economic crisis in Venezuela, the crypto mining industry has grown. According to the Cambridge Bitcoin Electricity Consumption Index, Venezuela is the largest contributor to any country’s Bitcoin hash rate in Latin America, which means that the country generates a significant amount of computing power.
However, Venezuela introduced a new law in September 2020 aimed at the country’s mining industry. In addition to creating a mandatory register and introducing new taxes for those working in mining-related sectors, the new law introduced the controversial “Pool de Minería Digital Nacional” (National Digital Mining Pool). Under this new requirement, miners must bring their hashing power to a new, government-sponsored mining pool.
Overall, there is still no real clarity about the mining pool, which means that the way the law is enforced is not really known and it is not yet known exactly how Venezuelan miners are required to participate.
While it may seem paradoxical to see such support for cryptocurrencies from a government that is often viewed as quite restrictive on its citizens and their freedoms, several crypto experiments have been conducted over the past year, including plans to allow Venezuelans to pay passports with Bitcoin using the BTCPayServer payment processor.
Although President Nicolás Maduro’s administration did not implement the passport plan, his vision for the use of crypto has not deteriorated. For example, Maduro proposed an anti-sanctions law in September 2020 to use cryptocurrencies to evade the various sanctions imposed on the country and in hopes of encouraging the use of crypto in various areas of business.
In particular, there were reports that Maduro’s government was using Bitcoin to facilitate trade between Iran and Turkey, two of the state’s current geopolitical allies.
Related: A Year After the Pandemic: How Argentina’s Economy Struggled While Its Crypto Ecosystem Was Thriving
In November 2020 it was also reported that the Venezuelan Army decided to open the Centro de Producción de Activos Digitales del Ejército Bolivariano de Venezuela (Production Center for Venezuelan Army’s Digital Assets), which will house ASIC mining machines for proof-of-proofs cryptocurrencies are working to generate “unblockable” financial income, according to the military leaders who inaugurated the facility.
All of these advances by the Venezuelan state in the crypto ecosystem have been to seek solutions to circumvent the sanctions the United States has imposed on Maduro, his cabinet and senior military officials.
However, the US authorities have stated that they are overseeing Venezuela’s cryptocurrency operations and even added their cryptocurrency superintendent – the highest authority in charge of regulating the crypto ecosystem in Venezuela – to the list of the most wanted US immigrants and customs authorities in June 2020.
Record number of bolivars locked in Bitcoin
The bullish rise in Bitcoin price was linked to the rapid devaluation of the Venezuelan fiat currency, which resulted in a record number of bolivars trading for bitcoin. In the first week of December 2020 alone, 5.85 billion bolivars were exchanged on the platform during the LocalBitcoins peer-to-peer exchange. By the first week of February that number had risen to 8.56 billion bolivars.
The complicated political and economic situation in Venezuela has led the government to consider alternative solutions. In the midst of this scenario, blockchain technology and cryptocurrencies in particular came to the fore.
Maduro isn’t the only one viewing cryptocurrency as a way out of troubled waters. One of its main opponents, Juan Guaidó, who is President of the National Assembly and has been recognized as the legitimate President of Venezuela by around 60 countries, has used the stablecoin USD Coin (USDC) to evade financial restrictions imposed by the Maduro government and to provide humanitarian aid send help to Venezuelans.
The funds used by Guaidó came from assets seized by the US authorities from the US-based bank accounts of Venezuelan state-owned companies and various members of the Maduro government.
Opinions within the ecosystem
To better understand what it felt like in the crypto ecosystem in Venezuela, Cointelegraph en Español spoke to some of the key players involved in the various events that set the tone over the past year.
Jorge Farias, CEO of Cryptobuyer, said Cointelegraph en Español that the use and introduction of crypto as a means of payment in Venezuela will become a reality: “The global and local situation has made it so that, thanks to the pandemic, companies and individuals are looking for payment alternatives that do not require interaction or the physical presence of people. “
Ernesto Contreras, head of business development at Dash Core Group, mentioned that Dash’s plans to expand into national chains have been halted due to the spread of the pandemic. During the embargo we also saw the growth in delivery offers that work in a 100% digital environment and several services like Dingo, Piido and others accepted Dash and Kryptos. He added:
“Despite the immense difficulties brought by the coronavirus, the crypto ecosystem continued to reach major milestones in Venezuela in 2020. This has contributed to a global environment that is becoming increasingly digital and has a positive trend for cryptocurrencies in the world, doors of great importance for the growth, adoption and use of Dash and Cryptos. “
Javier Bastardo, host of the Satoshi en Venezuela Podcast tells Cointelegraph en Español that “Venezuela continues to be one of the most active P2P stock exchanges.” However, he believes the trend has not yet peaked. Additionally, he believes that FOMO – the fear of missing out – is not affecting the situation as much as it was in 2017 and that a steady influx of people who have heard of cryptocurrencies in the past are only now choosing to enter the market. He added that another factor that dominated the past year was willingness to pay directly in crypto, which ultimately leads to sustained adoption.
Anibal Garrido, CEO of AnibalCripto, said Cointelegraph en Español “Venezuela has been part of important contributions to the development of the ecosystem.” He added that:
“The difficult situation of COVID-19 gave us a great learning experience: NOT to have to rely on physical presence for the harmonious development of our society.”
He added that the local mining law sets a precedent for other countries to evaluate and review. He also mentioned the integration of crypto payments in retail chains as well as developments in providing fast and secure fiat-to-crypto exchange processes.
Binance Spanish Community Manager Mariangel Garcia believes that “Venezuelans have been pulled out of our comfort zone, companies have been forced to start a digital transformation, and now many users can see how many options there are before this situation did not exist.”
She continued to tell Cointelegraph en Español This resulted in widespread adoption of Binance’s native cryptocurrencies in the country, as well as a surge in demand for its peer-to-peer platform. For Garcia this means that “thousands of Venezuelans have found financial freedom in our products without restrictions”.
She concluded by saying, “Venezuela is the only country in Latin America with an inclusive vision for adopting crypto, which is a good start.”
Jorge Farias, CEO of Cryptobuyer, unfortunately deceased shortly after the interview.