The authorities of Venezuela have established a set of ambiguous regulatory frameworks that significantly reduced the circulation of foreign currencies in the local black market. Venezuelans, who are struggling to move money in and out of the country, are beginning to turn to Bitcoin as an alternative.
The South American Bitcoin industry and infrastructure are well established. Venezuela alone has two major Bitcoin exchanges including Surbitcoin, which has recently demonstrated a rapid surge of demand for Bitcoin in the region.
However, local financial regulations and the consistent pressure from local authorities make it difficult for users to trade digital currencies like Bitcoin. The tightened policies of Venezuela even restricts the operations of local Bitcoin exchanges.
As an alternative, Venezuelan residents have begun to use LocalBitcoins, a peer to peer Bitcoin trading network, to purchase and sell Bitcoins in the region. The sudden increase in the userbase of LocalBitcoins has led to all time high trading volumes for the exchange in Venezuela, recording nearly 170,000,000 bolivar trading volume on a daily basis.
While the government-declared value of Venezuelan bolivars is substantially higher than that of actual market value, 170 million bolivars on a single exchange is still significant and it further signifies the increase in Bitcoin adoption in the region.
Previously, to move money in and out of the country, Venezuelans attempted to smuggle US dollars purchased from the local black market out of the country. Due to the tightened financial policies, it is now virtually impossible to bring out anything of value out of Venezuela.
Popular alternatives to the US Dollar included gold and diamonds, but the strengthened security measures of Venezuelan airports and ports restricted the volume of tradeable precious metals.
With US dollars and gold essentially taken away from Venezuela, its people has begun to utilize Bitcoin to secure their wealth and protect their money. Considering the worsening financial instability in Venezuela and the debt of the local government, many presume that the demand for Bitcoin in Venezuela and all of South America will continue to increase over the next few months.
Sources: LocalBitcoins, Image Credit: WAJ