Exploring Venezuela’s crypto ecosystem since the start of the pandemic

In the year since the KOVID-19 pandemic disrupted nearly every aspect of our lives, much has happened in the crypto-ecosystem around the world. How has the past year gone for crypto in Venezuela?

Even before 2020, a number of Venezuelan companies were accepting various cryptocurrencies as a means of payment; however, in the past year, significantly more companies have adopted this payment method. This ranges from the hospitality industry to the well-known pizza chain Pizza Hut, which has announced that it will accept bitcoin (BTC), Litecoin (LTC), Dash and other cryptocurrencies as payment.

Mid-2020 cryptocurrency exchange Cryptobuyer and payment processor Mega Soft announced an alliance that will allow some 20,000 merchants using their services to accept cryptocurrency payments through the exchange’s Cryptobuyer Pay solution.

Another important milestone was reached in September 2020, when the Bitcoin Hub was connected to the Blockstream satellite network – a first for Venezuela. Thanks to the joint efforts of Cryptobuyer and cryptocurrency educator AnibalCripto, the node was able to launch despite logistical constraints due to COVID-19-related blockchain measurements. Similarly, node officials announced that this is the first step in building a mesh network that can process bitcoin transactions without an internet connection.

New rules

Despite the current economic crisis in Venezuela, the crypto mining sector is booming. According to the Cambridge Bitcoin Power Consumption Index, Venezuela is the country in Latin America that provides the most hashed bitcoins, meaning it produces a significant amount of computing power.

However, in September 2020, Venezuela passed a new law to develop the country’s mining industry. In addition to introducing a mandatory register and imposing new taxes on those working in mining, the new law introduced the controversial Pool de Minería Digital Nacional (national digital miner’s pool). Under the new rule, miners must contribute to a new government-backed mining fund.

Overall, there is still no real clarity on the mining basin, meaning it is unclear how the law will be applied in practice, and it is still unclear how Venezuelan miners will have to participate in the process.

While it may seem paradoxical to see this level of support for cryptocurrencies from a government that is often seen as rather restrictive of its citizens and their freedoms, there have been several crypto experiments over the past year, including plans to let Venezuelans pay for their passports in bitcoins using the BTCPayServer payment processor.

But while the government of President Nicolas Maduro has not implemented its plan to introduce passports, it has not diminished its views on the use of cryptography. For example, in September 2020, Maduro proposed an anti-sanctions law to use cryptocurrencies to circumvent various sanctions imposed on the country and hopes to expand the use of cryptocurrencies in various business transactions.

Specifically, it has been reported that the Maduro government is using bitcoin to facilitate trade between Iran and Turkey, two of the state’s key geopolitical allies at the moment.

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It was also reported that the Venezuelan military decided in November 2020 to open the Bolivarian Digital Asset Production Center, a center housing ASIC mining equipment designed to produce cryptocurrencies to generate non-blockchainable financial returns, according to military leaders who inaugurated the facility.

All of these advances made by the Venezuelan state in the cryptocurrency ecosystem were intended to find ways around the sanctions imposed by the United States on Maduro, his cabinet and senior military officials.

Nevertheless, US authorities have stated that they are monitoring Venezuela’s cryptocurrency activities, and in June 2020 even listed their cryptocurrency commissioner – the highest authority regulating Venezuela’s cryptocurrency ecosystem – as most wanted by US Immigration and Customs Enforcement.

Record number of bolivars blocked in bitcoin

The sharp rise in bitcoin prices was accompanied by a rapid devaluation of the Venezuelan currency, which resulted in a record number of bolivars being sold for bitcoin. In the first week of December 2020 alone, 5.85 billion bolivars were traded on the exchange platform LocalBitcoins. In the first week of February, this figure rose to 8.56 billion bolivares.

The difficult political and economic situation in Venezuela has forced the government to consider alternative solutions. Amidst this scenario, blockchain technology and cryptocurrencies in particular have come to the fore.

Maduro is not alone in seeing cryptocurrencies as a way out of troubled waters. One of his main opponents, Juan Guaido, who presides over the National Assembly and is recognized in some 60 countries as the legitimate president of Venezuela, used a coinage (USDC) to circumvent the Maduro government’s financial restrictions and deliver humanitarian aid to Venezuelans.

The funds used by Guaido came from assets seized by the US authorities from the US bank accounts of Venezuelan state-owned companies and various members of Maduro’s government.

View on the ecosystem

To get a better idea of what’s happening on the ground in the Venezuelan crypto-ecosystem, Cointelegraph en Español spoke to some of the key players who participated in the various events that have set the tone over the past year.

Jorge Farias, CEO of Cryptobuyer, said the use and acceptance of crypto as a means of payment is becoming a reality in Venezuela: The global and local situation has driven businesses and individuals to seek payment alternatives that do not require human interaction or physical presence.

Ernesto Contreras, head of business development at Dash Core Group, said Dash’s plans to expand into national networks have been put on hold due to the spread of the pandemic. Also, in the blockchain phase, we have seen delivery offerings emerge that operate in a 100% digital environment, and several services such as Dingo, Piido and others have joined the adoption of Dash and crypto. He added others:

Despite the enormous challenges posed by the coronavirus, the crypto-ecosystem in Venezuela continued to reach great heights in 2020. This is part of a global environment that is becoming increasingly digital, and with a positive trend for cryptocurrencies worldwide, more doors of great interest have opened for the growth, adoption and use of Dash and crypto.

Javier Bastardo, host of the Satoshi podcast in Venezuela, told Cointelegraph en Español that Venezuela remains one of the most active p2p exchange markets. However, he believes that this trend has not yet peaked. He also believes that FOMO – the fear of missing out on something – is no longer as influential as it was in 2017, and that the steady influx of people who have heard about cryptocurrencies in the past are only now deciding to enter the market. He added that another factor that dominated last year was the willingness to pay directly in crypto, which ultimately creates a sustainable level of adoption.

Anibal Garrido, CEO of AnibalCripto, told Cointelegraph en Español that Venezuela has made a significant contribution to the ecosystem. He added that:

The difficult situation of COWID-19 has taught us a lot: NOT depend on a physical presence for the harmonious development of our society.

He added that the local mining laws set a precedent for other countries to evaluate and take into account. He also highlighted the inclusion of cryptocurrency payments in retail, as well as the progress made in establishing fast and secure processes for converting fiat into cryptocurrency.

Mariangel Garcia, community manager at Binance Spanish, believes that Venezuelans have been shaken out of their comfort zone, that companies have been forced to embark on a digital transformation and that many users are now seeing many options that did not exist before.

Speaking at the Cointelegraph en Español conference, she added that this has led to widespread adoption of Binance’s native cryptocurrencies in the country, as well as increased demand for Binance’s peer-to-peer platform. For Garcia, this means that thousands of Venezuelans have found unlimited financial freedom through our products.

She concluded with the following words: Venezuela is the only country in Latin America with a comprehensive vision for crypto-currency adoption, which is a good start.

Jorge Farias, CEO of Cryptobuyer, unfortunately passed away shortly after the interview.

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