What future do cryptocurrencies have in Venezuela? Experts point out opportunities and challenges

Cryptocurrencies emerged as a financial technology that promised to revolutionize global banking and provide new economic opportunities. However, in countries like Venezuela, experts point out the risks of these being used to evade sanctions and “build money laundering schemes.”

Although they present challenges, cryptocurrencies could also be a tool of economic progress for Venezuelans, as detailed at an event at the Wilson Center think tank in Washington on Monday.

“Cryptocurrencies have been used to launder funds in the same way that they have been used to evade sanctions and to deepen corruption in Venezuela,” said Venezuelan opponent Leopoldo López during the presentation of the report ‘Crypto in Venezuela: two sides of a coin’.

López highlighted that in places like the west coast of the United States, the conversation about cryptocurrencies is based on innovation and possibilities, which could also benefit Venezuela if scrutiny by regulatory entities is increased.

Democratic governments should counter their attempt to “exploit cryptocurrencies to move illicit profits into the international financial system,” according to the report.

“The difficulty is that technology is changing so quickly that the corrupt are moving faster than sometimes action can be taken,” said Kristofer Doucette, national security lead at Chainalysis, a provider of research and software for governments. and companies carry out secure transactions with cryptocurrencies.

In 2018, The government of Nicolás Maduro created the petro, a digital currency as an economic lifeline in a context of US economic sanctions and progressive devaluation of the bolivar. However, it did not have the desired impact.

Maduro established the National Superintendency of Cryptoactives and Related Activities (SUNACRIP) to regulate the use of cryptocurrencies, but in 2023 he was at the forefront of a political scandal called “PDVSA-Cripto.”

That scandal, according to which hundreds of millions of dollars were allegedly embezzled from the State through oil operations and digital currencies from the public system, led to the arrests of dozens of officials. Three of the people involved Have they died in state custody in recent months.

Doucette highlighted that governments such as Maduro’s or those in Iran, Russia and China may see cryptocurrencies “as an opportunity to rebuild another financial system based on intelligence and their own interests,” however, they must consider how to use the technology to “provide independence” and “eliminate” abuse of the tool.

The practical use of cryptocurrencies

Despite the corruption recorded with the use of cryptocurrencies, in Venezuela thousands of people “benefit from cryptocurrencies.”

Experts agreed that in addition to being a form of “protection” against hyperinflation, using more stable currencies than the bolivar, it now finds a new benefit in remittances. Especially when eight million Venezuelans have left the country.

“Today, the adoption of cryptocurrencies in Venezuela continues to grow due to the need to store value, due to the need to receive remittances. And because of the need of many organizations to overcome the blockade of civic space in Venezuela,” López added.

Sigal Mandelker, a lawyer who previously worked at the US Treasury Department, highlighted that banking systems must be “modernized” to respond quickly and efficiently to financial transactions made with cryptocurrencies.

“It’s an incredible way to support freedom… to support people in crisis around the world. It is very transparent. It is traceable. “If you can make it programmatic, you can use smart contracts to do all kinds of interesting things,” Mandelker said.

Cryptocurrencies would help people in any Latin American country “participate in the same economy together,” experts said, by connecting with companies around the world and being remunerated through them.

“It’s about the future. It is about incorporating people into the global market without having to migrate, you could have a job and get paid in Venezuela, in Nicaragua, in Africa and get paid without any restrictions,” López added.

Mandelker, for his part, added that the US government is making efforts to regulate cryptocurrency practices so that “bad actors cannot use them.” However, through education, it would allow Venezuelans to be part of a “global economy.”

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