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Venezuelan Dictator, Maduro, Claims Cryptos Will Help on Fighting Sanctions Against Venezuela

Venezuela, maduro, crypto

October 5, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Venezuela President has declared the country is looking to use crypto against sanctions. The ruler mentioned the role of cryptos in fighting sanctions in a televised address. He said the government is considering the use of various cryptocurrencies. 

He introduced a bill on 29th September on the crypto currency use. The bill looks into the possibility of using cryptos in both domestic and foreign trade. He said, "it will give new strength to the use of petro and other cryptocurrencies." 

The country is embracing the other cryptos after Petro failed to gain traction. It is at the time the country is struggling with economic and social development. This is after the US government sanctioned its activities leading to paralysis. The country is finding it hard to trade in the USD-dominated global market. 

Venezuela's legislative body is reviewing the new bill. Its success will help the country in economic recovery. 

The oil-rich country is now looking to virtual currencies as the best solution. It will leverage the cryptos to compensate for the lost trading opportunities. The president believes the cryptocurrencies can replace the fiat currencies. That the Venezuelan banks are already running well. Moreover, the payment system can accommodate the crypto system. Merchants are already accepting it.

In the speech, he said, "Donald Trump is blocking Venezuela from transacting in any world banks. There are other formulas we are already using. Our banking system works in Russia and China."

Venezuela is testing the possibility of holding crypto reserves. It considers Bitcoin and Ethereum the top targets. The country's big firms, like Petroleos de Venezuela, are already using BTC.

The company is considering sending BTC and ETH to the central bank. After which they can then use the coins in all transactions. 

The History of Crypto Use in Venezuela 

The crypto use in Venezuela revolves around the unprecedented economic decline. The country has experienced inflation since 2013, with the value of the Venezuelan bolivar losing more than 200,000% value. It has led to goods becoming more expensive. 

The country earlier resorted to its own developed crypto for safety. The government only permitting the use of Petro national currency. The president launched the coin in October 2018. It became the first state-backed cryptocurrency. 

Venezuela's rich oil reserves backed Petro failed to take off. Any currency backed by another commodity can lose value depending on the economy. Reports credit the failure on hurried launch by the president. Indications are that the system bullied some developers into releasing the coin. 

Embracing the other cryptos seem the only way out of the economic turmoil. The country was against Bitcoin. They felt it was a threat to the national currency. This was due to the coin's decentralized nature. 

They have now realized the anonymous nature seems to work both ways. The country can use the cryptos to evade sanctions. 

The cryptos can also replace the national fiat currency. The Venezuelan population lost trust in the national currency. The cryptos allow them the chance to operate outside the main system. They don't have to face the government manipulated fiscal and monetary policy. 

Still, there is a concern about crypto volatility. Digital currencies have uncertain values. Cryptos have had irregular runs since inceptions. The population would not like such uncertainties. Cryptos, though, are still the best option available. 

The population has embraced the cryptos. The peer-to-peer transaction within local exchanges has increased. The country is currently third on the global crypto adoption index.  

Other Countries Looking to Use Cryptos to Evade Sanctions 

Venezuela is not the only country that uses crypto to evade economic sanctions. Several other countries have advanced crypto strategies. Some of these countries are;

  • Iran – The Iranian state has struggled with economic sanctions. It has seen the country's economy shrink by 10 – 20 percent. It now relies on crypto to avoid traditional banks. It also seeks to gain from the crypto value increase when the fiat currency falters.The country has been under sanctions since 2018, with devastating effects. The cost of living has increased by around 35.9%. Iran is taking advantage of the decentralized nature of Bitcoin. They also have low power costs for easier Bitcoin mining. It recently handed out over 1000 new mining permits for increased crypto mining.

  • North Korea – North Korea has been at loggerheads with the US for some time. They have differences over nuclear deals. For that, they have been facing economic sanctions.Cryptocurrencies are making it easier for the country to access foreign exchange. The country relies on experts to go about the plan. They hire people to open crypto wallets. The local miners then user the wallets to transfer cryptos to European addresses. The coins are then mixed into several wallets to avoid tracing. The country uses its nominees to buy Bitcoin from the European markets. They then exchange them into other coins like Ethereum and Litecoin. Exchanging the cryptos into fiat currencies is easier. The government gains the fiat without the traps of the sanctions. 

Final thoughts 

Crypto is a double-edged sword asset. It comes with several benefits and some negatives. 
It has liberated the economy. It has also provided the best alternative at a time when the fiat currency goes down. The only concern on the cryptos is its use for money laundering and evading sanctions. 

Several countries are using digital coins to avoid sanctions. The take advantage of cryptos decentralized nature. The cryptos also have no asset backing it. It means the traditional economy has no impact on it. 

Venezuela has been on the digital currency path for some time. It was one of the first countries to launch a state-backed cryptocurrency. It failed to pick up. The coin was only available within the Venezuelan borders. Bitcoin now seems to be the ultimate solution. 

The country needs cryptos for more than evading sanctions. It needs an alternative to the failed Venezuelan currency. 

The country has faced continued hyperinflation in recent times. Cryptocurrencies, at the moment, seem the best solution. The coins only rely on market trends to determine value hence more stable. 

The country already has crypto guidelines in place. Nothing is likely to stop cryptos from working for it.

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