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Venezuela uses Bitcoin to escape US sanctions

Photo of: Joseph Stone
by Joseph Stone

Venezuela has been facing many difficulties for years. First of all, the country is in the grip of an unprecedented economic crisis. This crisis is reflected in hyperinflation, which is devaluing the local currency, the bolivar, more and more. In addition, as a result of geopolitical tensions, Venezuela is undergoing US economic sanctions. In the midst of this inextricable situation, Bitcoin plays a significant role in keeping the country functioning.

US sanctions have put President Maduro under pressure. Indeed, they have made the economic situation of the country even more complicated. While the country is more than ever dependent on its foreign market, many western countries are reluctant to export their products to Venezuela under American pressure. These sanctions have therefore forced the Venezuelan government to find solutions for imports and exports.

To avoid the economic asphyxiation of the country, President Maduro wants to convert Venezuela into an “exporting nation”. To do so, the Maduro government has decided to rely on its private companies, not subject to U.S. sanctions, for its exports. This makes it possible to circumvent US sanctions. The government’s plan is to use these private companies to strengthen economic cooperation with its main allies. For example, Turkey and Iran are the countries that supply Venezuela with food and fuel.

In the first half of 2020, 35 private companies imported food from Turkey, compared to 7 in 2019. In total, more than 140,000 tons of products were brought into the country in the first half of 2020. These products consisted mainly of pasta, oil and meat.

In addition to going through its private companies, the Venezuelan government has decided to finance its imports with Bitcoin. Thus, the imports made with Turkey and Iran were mainly paid in Bitcoin. There is talk that Iran will soon take the same step to finance its imports.

In 2018, the Venezuelan government created its own cryptocurrencies, the Petro. This crypto was backed by oil and had the ambition to be used on a large scale in the country to compensate for the weakness of the bolivar. However, this state-owned crypto never won over the crowds. As a result, the government was forced to turn to more traditional cryptos, led by Bitcoin.

“We are going to use all the cryptocurrencies in the world, whether private, public or national, for our internal and external trade.” Maduro, President of Venezuela

At the citizen level, the Venezuelan government has taken a further step to encourage the use of Bitcoin, already widely used in the country. Thus, in November, the government launched a new exchange that will allow Venezuelans to change their bolivar into Bitcoin.