As the value of hard currency changes drastically—and often—developing or recession-hit countries are finding Bitcoin as an innovative solution.
People stand in line to withdraw cash from an automated teller machine (ATM) outside a bank in Caracas, Venezuela, on Wednesday, Nov. 30, 2016. (Wil Riera/Bloomberg)
Just look at Venezuela, the country with the highest inflation rate in the world. The socialist nation has experienced a swift fall in oil prices, throwing the entire economy into turmoil. Experts say that Venezuelan inflation could go as high as 1,600%, leaving many people without basic necessities.
A 100 bolivar note—once the highest denomination offered in Venezuela—is now worth roughly about 2 cents. The country is printing higher-denomination notes so citizens don’t have to bring bags and bags of cash for transactions in stores, but this doesn’t solve the issue of poverty.
With the Venezuelan bolivar essentially worthless and supplies rapidly running out, Bitcoin is rising as an answer. According to Bitcoin brokerage Surbitcoin.com, the number of Venezuelan users skyrocketed, from 450 in August 2014 to more than 85,000 in November 2016.
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So, just how is Bitcoin helping in Venezuela, and can it be used to boost other recession-struck nations?
Recession-proof currency
As the bolivar continues to fall, many Venezuelans are turning to Bitcoin as an alternative. Humanitarians can donate Bitcoin to those in need, who can then use Bitcoin to buy Amazon gift cards, then purchase goods through the online retailer.
One of the biggest strengths to Bitcoin, and one often ignored in developed nations such as the United States, is that you don’t need to have a physical bank account to send and receive Bitcoin. All you need is an Internet connection, which many Venezuelans have in the form of mobile phones.
This lowers the bar for Venezuelans seeking relief, allowing them to receive Bitcoin through their phone and use that money for desperately needed goods. Some companies in Venezuela are even exclusively accepting payment in Bitcoin, knowing that the bolivar is highly volatile and largely useless right now.
Another major positive to Bitcoin for a country in disarray is that its government can’t control the value of it. Countries like Venezuela can become banana republics as their government causes rampant inflation via over-printing currency.
Unlike the bolivar, a government agency can’t just print more Bitcoin. There’s no central agency regulating Bitcoin, allowing the free market to take hold. While the value of Bitcoin can (and does) change quite often, the shifts aren’t as violent as the devaluation of bolivar.
New 500 and 5000-Bolivar notes pictured in Caracas on January 16, 2017. (JUAN BARRETO/AFP/Getty Images)
Bitcoin taking hold worldwide
Unlike many other currencies, the value of Bitcoin continues to grow. Once a mysterious cryptocurrency, Bitcoin is now widely acknowledged and accepted as a valid form of payment.
Cash-strapped governments are taking notice. Indian Prime Minister Narenda Modi and Venezuelan President Nicolas Maduro have accepted policies that allow Bitcoin to flourish in struggling economies.
The risky-but-lucrative field of Bitcoin mining has also found a foothold in Venezuela, where many people are living off a government-issued stipend of roughly $9 per month.
While countries such as Iceland, Bolivia, Ecuador and Vietnam have outright banned Bitcoin, it’s largely legal to some degree throughout the world.
Those in Venezuela have taken advantage of the government’s embrace of the cryptocurrency, as Quartz reported in November that Venezuelan trading volume on LocalBitcoins reached as many as 370 Bitcoins per week.
Countries with struggling economies can look to Bitcoin as a more reliable alternative for citizens. Usage of Bitcoin has surged in Nigeria, where Google search interest in Bitcoin is definitely the highest, as well. As Bitcoin becomes accepted and embraced by more countries, the taboo will lift and those in impoverished nations can have access to a more stable form of currency.
The fact that Bitcoin is not within government control scares nations with a strong central bank, but for nations with currency in disarray, Bitcoin is a relatively stable investment. If you really want to help those in developing countries, a gift of Bitcoin might be the best bet for a sustainable recovery.
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