Cryptocurrency enthusiasts love to talk about Venezuelan users – wracked by political oppression, economic collapse and food insecurity – as a prime example of bitcoin’s subversive potential. But the reality is far more complicated.
Venezuelan expat David Díaz of the Blockchain Academy in Buenos Aires told CoinDesk that many Venezuelans are learning about cryptocurrency through forced exposure to the state-issued petro, in addition to aggressive outreach strategies from projects like dash. Many don’t even know that bitcoin is useful itself, beyond its ability to ease the transfer of assets like dash or dollars.
That’s why Díaz is teaming up with fellow expat Jorge Farias of Panama-based startup Cryptobuyer to offer a free educational course about bitcoin to Venezuelans, including online programming and in-person classes in Argentina, Venezuela and Panama. News of the program was revealed exclusively to CoinDesk.
The course, which starts in February, will be very similar to the paid programs Díaz has already run for roughly 2,000 students in Buenos Aires, including a few hundred Venezuelan migrants. But now the focus will be on providing free information that is useful in a Venezuelan context, where cheap Android phones and censored internet access impact usability.
Díaz told CoinDesk:
“The main benefit for Venezuela is the knowledge, what to do with bitcoin, how to escape from the power the Venezuelan government has placed there, not only economically but also for information. There is a lot of censorship there.”
Fellow expat Eduardo Gomez, the head of support at the crypto startup Purse who recently moved to Argentina, now uses the peer-to-peer exchange LocalBitcoins to help his mother pay bills.
“The government has [told] the private banks and government-run banks that external IPs should not be able to access their bank accounts,” Gomez told CoinDesk. “The government wants to control remittance businesses.”
Díaz and Gomez are among the many Venezuelans connecting with their homeland through the bitcoin-centric diaspora. WhatsApp groups and Instagram communities help expats coordinate financial transactions on the ground. LocalBitcoins usage surged throughout the year and now facilitates weekly volumes worth billions of bolivars.
According to a recent report by the United Nations, a whopping 17 percent of the country’s population has fled Venezuela in recent years.
There are now many Venezuelan expats working on various projects to help their countrymen, including Alejandro Machado, co-founder of a San Francisco-based nonprofit called the Open Money Initiative that aims to create fintech products and tools for Venezuela. Machado has helped several Venezuelans use exchange platforms like LocalBitcions and AirTM, since the latter is blocked inside Venezuela.
The challenges Machado experienced helping crypto newbies highlights the discrepancy between the tech-savvy intelligentsia and low-income communities.
“They trust me and I can do it for them, but they don’t trust themselves doing it,” Machado said. “The level of technical sophistication among everyone [in Venezuela] is not the same, and it’s lower than you’d expect.”
Migration risks
Some Venezuelans fleeing the country do so with their assets held in bitcoin, to avoid being harassed at the airport or the border. Both Díaz, who moved to Argentina in 2015, and Gomez, who moved in September 2018, are among them.
“Carrying around cash is so risky, any valuables, jewelry, whatever, it’s so risky,” Gomez told CoinDesk. “Bitcoin helped a lot because we didn’t need to carry anything physical around. We came here to Argentina and all our savings were in crypto.”
Gomez was unbanked in Argentina for several months, until Tuesday, and relied entirely on the Buenos Aires bitcoin community to help him liquidate crypto assets as needed. (Bitcoin’s price volatility can feel negligible when compared to the Venezuelan bolivar, which the IMF predicted could hit an inflation rate of 1,000,000% by 2019.)
“This is a real use case, but it’s not something that a lot of people are doing because a lot of people don’t know it’s possible,” Machado said, adding that if crypto UX “doesn’t get any easier, we won’t see this operating at scale.”
Díaz said expats become more involved with the broader bitcoin ecosystem when they leave Venezuela. In part, this is due to fear that public association with crypto inside Venezuela could attract attention from corrupt government officials.
“There was a big community in Venezuela, but we were mostly underground,” Díaz said. “In Argentina, I could find a more open community. We could have regular meetups.”
Although some local projects like EOS Venezuela have so far managed to provide liquidity to small groups of local users without such conflicts, those use cases are both nuanced and nascent.
Borderland economy
Some migration experts compare the Venezuelan crisis to the Syrian civil war, a mass forced-migration movement that leaves many unbanked and desperate for basic necessities.
The difficulty low-income families have in buying food is precisely what the nonprofit GiveCrypto sought to address with its campaign to distribute EOS tokens to 100 families living in the Venezuelan border town of Santa Elena de Uairen.
GiveCrypto’s executive director, Joe Waltman, told CoinDesk that EOS Venezuela provides fiat liquidity to a local merchant while participants use the EOS wallet Bonnum, which does not support bitcoin nor offer users their private keys.
On one hand, this allows several families to use the same phone to access EOS donations. Plus, Bonnum CEO Edmilson Rodrigues told CoinDesk from Brazil that the startup aims to someday offer a blockchain-agnostic wallet.
However, for now, Venezuelan merchants appear to be more interested in using EOS to access fiat than holding crypto itself.
Waltman explained:
“You go to this person and say this dumb foreigner is going to be dropping a bunch of money into this town and it’s only going to be redeemable in a couple of locations. Do you want to be one of those locations?… It hasn’t been a hard sell.”
This experiment originally grew out of Bonnum’s closed beta in Brazil, where the startup discovered a few dozen families were using EOS to buy necessities from a local merchant close to the border who accepts EOS. Those families then routinely trekked across the Venezuelan border, delivering goods to Santa Elena de Uairen. This type of crypto-fueled borderland economy is increasingly widespread.
Jose Antonio Lanz, a Venezuela-based reporter at Ethereum World News, told CoinDesk he used Facebook and Telegram groups to learn about cryptocurrency. Then he sent bitcoin to a Colombian black market dealer who brought medicine across the border for Lanz’s mother, who was battling cancer.
“Now I can say that my mom is alive thanks to bitcoin,” Lanz said, adding that he tried local hospitals and pharmacies but in the end was forced to turn to the black market.
“The important thing is to be able to give the sellers the money as they want. Some wanted bolivars, some wanted PayPal,” he continued.
Crypto limitations
All things considered, there is still a long way to go until crypto is used for its own merits in Venezuela. At the moment, it’s often used as a tool for acquiring or liquidating fiat.
Machado, of the Open Money Initiative, told CoinDesk that daily crypto usage is “not a widespread phenomena” on the ground. Waltman agreed, saying:
“There’s a sad irony. The poorer you are, the less you can actually use cryptocurrency.”
Díaz disagreed, saying that almost every Venezuelan he knows now uses bitcoin for remittance and international transfers. He conceded, however, that most are using it as a tool to get goods delivered to Venezuela or acquire and then store dollars in an offshore bank account.
Dash and EOS may have more merchant adoption inside Venezuela, according to Díaz, but they rely on sponsored liquidity networks and local ambassadors converting new users who often lack a basic understanding of cryptocurrency.
As such, Open Money Initiative co-founder Jill Carlson said that there’s a dire need for more research on the ground in Venezuela. Otherwise, cryptocurrency distribution initiatives run the risk of becoming mere marketing stunts.
“Maybe we find that cryptocurrency is actually, in its current form, not suitable at all for a situation like the one inside Venezuela,” Carlson said. Waltman agreed that GiveCrypto is still figuring out what a long-term strategy in Venezuela would look like.
Speaking to how middle-class households use crypto to store value and buy basic goods like shampoo, Carlson added:
“It’s not just a single experience or situation. And then for us, as entrepreneurs working with technology and crypto, we need to recognize that the person who is worrying about shampoo and the person worrying about how they are going to feed their kids tonight are so, so different.”
As Carlson’s and Rodrigues’ respective projects collect data, Díaz’s upcoming Blockchain Academy program aims to bridge the knowledge gap inside Venezuelan so that newbies can choose which cryptocurrency and storage solutions work best for them.
Meanwhile, the underground migration network continues to spread.
“I know other projects that are helping people to get out of the country with bitcoin,” Díaz said.
Venezuela protesters image vi Edgloris Marys/Shutterstock