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The ongoing hyperinflation in Venezuelan markets is reportedly causing an increase in Bitcoin adoption, according to the Panam Post.
The online media outlet has collected evidences from a nonprofit digital currency educationalist, Bitcoin Venezuela. Their report demonstrates a drastic surge in Bitcoin usage — almost 50% within one week — in the wake of government’s stringent controls over the foreign exchange markets.
The Backdrop
Back in February 2003, the Venezuelan Government — led by the late former President Hugo Chavez — introduced a three-tier exchange rate policy in order to prevent capital flight. The decision however backfired, for then came a series of currency devaluations that ended up disrupting the nation’s economical growth. In 2010, Venezuela suffered one of the year’s highest inflation.
However in February 2015, the country’s in-term finance minister Rodolfo Marco Torres announced to relax currency controls. His new amendment allowed free markets to directly exchange local currency for dollars. It however exempted most currencies from passing through the new exchange, thereby indicating to maintain the aforementioned three-tier system.
The finance minister said that it would continue to evaluate 6.3 Bs as the primary dollar rate for imports. Economists however believed that the exchange rate was heavily overvalued, a thing that was further influencing distortions in the economy. It was meanwhile helping the government in easing its budget deficit but, on the other hand, was inflating the values of import goods.
However now, the socialist policies have created an indisputable mayhem in the Venezuelan markets. The government’s decision to completely divorce the supple-demand factors has made Bolivar as valuable as a toilet-paper, quotes JD Tuccile, Managing Director of Reason.com. This has further driven local businesses to accepting dollars for goods and products, sidelining their own devaluated national currency. Bloomberg further notes:
“The stunning collapse of Venezuela’s bolivar in black market trading this month — it fell to as low as 423 bolivars per dollar from 279 at the start of the month — has left Venezuelans scratching their heads, with many wondering why it has sunk below the value of gold and hard currency the central bank has to back it.”
Enters Bitcoin to the Rescue
Amid the economical mayhem, Venezuelans are looking to utilize every last resort that could help them escape the currency collapse. Bitcoin, a decentralized and volatile digital currency, seems to be one among such options.
As Panam Post reports, the digital currency is indeed a hot-topic among the internet warriors, with the concerned groups adding more members at the end of each economically frustrating day. An anonymous Bitcoin user, who also represents one of the Venezuela’s Bitcoin advocacy groups, confirmed the reports and said:
“We are offering people the the chance to buy bitcoins online and thus escape the ever-increasing devaluation of the national currency. We recognize that Bitcoin is volatile, but the price never fluctuates at the same rate as the devaluation of the Bolívar, which lost 60 percent of its value in one month.”
“The SurBitcoin exchange is already the second largest in transaction volume in Latin America after Brazil,” he added. “The growth is evident.”
Introducing Bitcoin in-between Venezuela’s economic slowdown certainly helps people to easily exchange Bolivars for Dollars. According to CoinMap.org, there is also an increase in the number of small and medium businesses that have already started accepting digital currency payments in Venezuela.
