Venezuela is a perfect example of how a resource-rich country could end up with tons of financial troubles. Faced with a record-breaking inflation rate, Venezuelans are now increasingly looking into cryptocurrency as a payment option and as a more stable method of storing their wealth.
Faced with the rapid decline of their money’s purchasing power, Venezuelans have no choice but to come up with out-of-the-box solutions to offset the effects of their country’s sky-high inflation rate. One of these is to bet big in cryptocurrencies to help them to preserve the value of their wealth and, perhaps, even make some profit in the process.
The citizens of Venezuela are, currently facing a record-setting inflation rate that has greatly eroded the purchasing power of the Bolivar, which is the nation’s currency. The currency’s value diminished so much that it got to the point where shoppers have to bring trash bags full of money to pay for their purchases.
While other countries worry if their inflation approaches the double-digit territory, that’s nothing compared to what Venezuela is currently facing. According to data from the International Monetary Fund, Venezuela’s inflation rate is at a record high of 13,860 percent and way above the global rate of 3.5 percent. In layman’s terms, the items that Venezuelans bought for just 1 Bolivar a year ago is now going to cost them around 139 Bolivars.
Given this scenario, citizens are now looking at cryptocurrency as a possible way to preserve the value of their wealth. Recent data reveals a massive rise in Bitcoin purchases in the country suggesting that the world’s number one digital coin regarding market size is the crypto of choice for most Venezuelans despite BTC’s decline from its all-time high of around $20,000 last year.
The country’s situation gave rise to increased crypto mining activity in the country as more entrepreneurial Venezuelans try to take advantage of their relatively cheaper power rates. However, it appears that the government is not too happy with all the mining activities of its citizens.
In May, reports surfaced that it has imposed an import ban on crypto mining equipment such as processors, computers, power plants, cards, phones and other electronics.
Yet, it can’t be said that the Venezuelan government is anti cryptocurrency. In fact, it already launched its own oil-backed cryptocurrency called Petro and even declared the digital coins as a legal tender.
It remains to be seen if Petro will take off in the long run. Venezuelans seem satisfied to keep their assets on the tried and tested Bitcoin at the moment.
Venezuela’s inflation may have helped spread cryptocurrency’s acceptance in the country as it is now seen as a more stable payment system compared to the Venezuelan Bolivar. CriptoLugares, which is a mobile app that accepts cryptocurrencies as payment, is now increasingly becoming more popular and is accepted by over 180 businesses all over the country.