Venezuela Government Adopts Crypto Payments To Mitigate US Sanctions

News / 08.12.2020

Venezuela has increased measures to utilize cryptocurrency payments for cross border payments as it looks to reduce the effect of U.S sanctions. This renewed effort is driven by the new anti-social law introduced by Venezuelan President Nicolas Maduro in September.

The anti-sanction law gives the executive power to authorize the creation and implementation of any financial mechanism. This has been put into effect with the South American nation paying allied countries like Iran and Turkey in Bitcoin.

Maduro is also looking to expand cryptocurrencies for public, private, domestic, and foreign trade. As a reminder, the Venezuelan government had already tried to push for the use of Petro (PTR), its state cryptocurrency.  However, it was forced to turn to firmly established cryptocurrencies like Bitcoin and Ethereum to support the fragile Venezuela economy.

Venezuela: A Haven for Cryptocurrencies?

That the Venezuelan government is turning to cryptocurrency is not entirely a surprise. The country is currently undergoing hyperinflation with its economy at its lowest ebb. A combination of American sanctions and the Covid-19 pandemic has also taken its toll on the Venezuelan economy.

These factors have contributed to an increase in cryptocurrency adoption in the country. Citizens have turned to crypto-assets like Bitcoin as a hedge against the rising cost of living in the South American nation. Venezuela also has one of the highest volumes of bitcoins traded within Latin America and an active crypto community.

The government is well aware of the growing popularity of cryptocurrencies and has actively supported its adoption. The Petro’s creation, a state-owned cryptocurrency backed by barrels of the country’s oil reserve, was a major step. Recently the government created a state exchange for Petro, Bitcoin, Litecoin, and Dash, which offered easy exchange between assets.

Still, this is the first time that a government has relied so heavily on cryptocurrencies. Will this allow Venezuela to support an economy that is still severely strangled by US sanctions? It remains to be seen.

Olowoporoku Adeniyi is a blockchain enthusiast and crypto evangelist. Currently he loves all things crypto and covers happenings within the blockchain space.