Bitcoin Volume Reaches All-Time High in Venezuela

Venezuela has once more reached an all-time-high figure on peer-to-peer trading volume, according to Coin.Dance. During the past week, more than 735 BTC ( roughly 35M VEF) exchanged hands on the BTC/VEF market of the popular p2p exchange, LocalBitcoins.

According to Venezuelan exchange, Surbitcoin.com, the number of Bitcoin users has been increasing steadily in the past three years, from 450 in August 2014 to 85,000 in November 2016.

The increasing interest in Bitcoin and cryptocurrencies in general is due to the country’s long-lived economic depression and its currency’s hyperinflation, which is estimated to be the highest in the world, at around 500% and rising.

Due to the country’s currency exchange restrictions in which an artificial peg for the USD was  introduced along with a rule where dollars can only be bought from the government, citizens have a hard time importing basic goods which are often lacking in the country and are not sold for VEF anywhere else but Venezuela.

As so, Bitcoin has become a sort of safety net for some citizens who count on it to protect their savings from the country’s hyperinflation and to interact with e-commerce platforms where they can buy basic goods like Amazon Prime Pantry service and others, something that would not be possible without Bitcoin.

Venezuela’s “love/hate” relationship with Bitcoin

Former President Hugo Chavez’ legacy was mostly about improving quality of life and offering subsidies to the poor. This policy caused the country to overspend its oil revenue which, combined with the drop in oil price at the time, caused a shortage of USD and helped steer Venezuela into its current financial state.

Current president, Nicolás Maduro promised to keep this economic legacy alive after Chavez’ death and many of these subsidies are still in place, including electricity.

As a result, cryptocurrency mining is becoming increasingly popular in the country, since the costs associated with the practice are paid by the government and not by the miner himself. Although this may seem like a miner’s paradise at first, cryptocurrency mining has become an increasingly dangerous practice in the country.

The Bolivarian National Intelligence Service (SEBIN), Venezuela’s secret police, has been cracking down on cryptocurrency miners in the country. In the last months, numerous reports of arrests and attempts to extort miners in the country have surfaced on the Internet.

In March of 2016, Joel Padrón and José Perales were arrested for possession of “illegal” mining equipment and electricity theft. The arrest of the miners also led to a consultant for Surbitcoin being arrested simply because the accused miners stated that they used the exchange to trade the Bitcoins mined.

Then, in November, two brothers who own a Bitcoin mining operations and whose identity have not been revealed were raided by the country’s secret police. The brothers reported that the SEBIN officers ordered them to pay $1,000 for every ASIC owned, which they did.

In January 2017, four Bitcoin miners who were operating nearly 300 machines were arrested for allegedly “affecting stability” of the country’s electricity supply. The Venezuelan Scientific, Penal and Criminal Investigation Corps said that the operation, which also involved the selling of bitcoins on the country’s border, was having a negative impact on the national grid.

So, although Venezuela subsidizes electricity, Bitcoin mining is an extremely risky practice and may very well become illegal in the future. Nevertheless, Bitcoin will most likely continue to grow in the country has a perfect example of how a deflationary and decentralized cryptocurrency can return purchase power to the individual.