Category Archives: bolivar

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Venezuela Central Crypto Bank Next as IMF Predicts Million Percent Hyperinflation

It has been reported that there are new plans afoot for a Venezuelan central bank cryptocurrency along with a “superior court to the Supreme Court of Justice”.

According to Venezuela National Constituent Assembly member Hermann Escarra, the government is preparing to change the constitution to allow for the new crypto bank.

Venezuela’s crisis has steadily worsened as a result of lower oil prices, corruption, and a mismanaged socialist system, experiencing all but a total collapse of the economy, public services, security, and healthcare. In February, Venezuela launched its own Petro cryptocurrency backed by the country’s oil reserves.

Shopping bags made of the national currency the bolivar (VEF) are now being made in order to transport the notes, and a cup of coffee costs around VEF 2.2 million (around USD 0.50 at black market rates). For the same price, you can fill a small SUV with petrol almost 9,000 times.

The government continues to print money at an alarming rate with a current inflation rate of over 25,000%. The IMF predicts hyperinflation in Venezuela will reach a staggering one million per cent by the end of this year at the current rate, although this has been refuted as ludicrous by some economists. Economic meltdown and a recent assassination attempt on President Maduro just this weekend continue to paint a grim future for the South American oil-rich giant.

It is uncertain if a cryptocurrency-based central bank can do anything to help to at least alleviate some of the country’s extreme financial problems, particularly as the Petro has so far made little impact. It looks very much as though Venezuela has reached the “try anything” stage. Nonetheless, Escarra divulged the latest plan on Thursday:

“The National Constituent Assembly of Venezuela… is preparing a reform to the Constitution that would include a central bank for crypto-assets and a superior court to the Supreme Court of Justice… the draft changes to the Constitution will be presented in 35 days to the board of the Constituent Assembly.”

Maduro’s new “Bolivar Soberano” which is linked to the Petro is also ready for release on 20 August.

 

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Venezuela Ditching Bolivar Fuerte for Crypto-Backed Sovereign Bolivar

The Venezuelan government is ditching the Bolivar Fuerte fiat currency and replacing it with the Sovereign Bolivar on 20 August 2018, which will apparently be tied to Venezuela’s state cryptocurrency the Petro. This is due to extreme hyperinflation that has made the Bolivar Fuerte practically worthless, to the point that toilet paper is a far more ideal currency than the Bolivar Fuerte. The Bolivar Fuerte is expected to reach 1 million per cent annual inflation by the end of the year according to the International Monetary Fund. At this point the situation in Venezuela can be considered a currency collapse, like post WW1 Germany and more recently in Zimbabwe.

The Bolivar Fuerte replaced the Bolivar in 2008, with each Bolivar Fuerte being worth 1,000 Bolivars. The transition from Bolivar Fuerte to Sovereign Bolivar will be even more extreme, with each Sovereign Bolivar being worth 100,000 Bolivar Fuerte. Originally, the Sovereign Bolivar was going to be launched in June 2018 at a ratio of 1 to 1,000 Bolivar Fuerte, but was delayed.

There would be nothing to stop the Sovereign Bolivar from experiencing hyper-inflation like the Bolivar Fuerte or the Bolivar if nothing else was changed, but the Venezuelan government is trying something drastically new via anchoring the Sovereign Bolivar to Venezuela’s state-backed Petro cryptocurrency.

The President of Venezuela, Nicolas Maduro, says, “The economic reconversion will start on August 20 definitively with the circulation and issuance of the new Sovereign Bolivar, the new monetary cone that is going to have a new method of anchoring the Petro.”

Maduro goes on further to say that the Petro will be improved to proliferate globally. Technical details of the Petro are difficult to verify. It is supposed to be backed by Venezuelan oil, but it is unknown how exactly.

This marks the first time in history that a national fiat currency would be backed by a cryptocurrency. If everything is true regarding what Venezuela says about the Petro, then the Sovereign Bolivar would essentially be an oil-backed currency, which is another first. Details on how the Sovereign Bolivar will be anchored to the Petro have not been disclosed.

 

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Venezuela Targets Bank Accounts for Crypto Sold at “Speculative Prices”

The Venezuelan government has announced that it will start monitoring accounts of its nationals who conduct cryptocurrency transactions.

Vice President Tarek El Aissami explained that the government will start monitoring bank accounts for crypto-related transactions and will prosecute those trading them “at speculative prices,” according to Bitcoin.com.

The new drive to monitor Venezuelan citizens’ bank accounts follows a previous plan called “Operation Paper Hands”, said to be the largest anti-litigation procedure in the country’s history. Venezuela’s Prosecutor General, Tarek William Saab commented that the action was planned “to take action against individuals and companies that have incurred misappropriation, and dissemination of false information about the exchange rate.”

The operation has resulted in 1,382 bank accounts being frozen, equating to 711,967 million bolivars ($10.6 mln) being blocked.

The following phase of the crackdown launched last week is called “Operation Metal Hands” which is now turning its focus towards cryptocurrencies. The government claims that Venezuelans have purchased gold from small mining operations, sold it outside of the country and then by using cryptocurrency transactions the sales have “hit the Venezuelan monetary system.”

Since the launch of Operation Paper Hands, two crypto exchange operators were shut down by the government, but this did little curb elicit trading. In response Vice President Tareck El Aissami authorized just three exchanges, based in Caracas to perform transactions, although the president himself had certified 16 other exchanges in April with the purpose of listing the Petro. It appears however that three new exchanges show no indication of trading in cryptocurrencies.

Bitcoin is now recognized as the only way of getting around the country’s currency controls, and bitcoin mining offers Venezuelans a chance to pay for good imported from overseas. Although the process is not sanctioned for individuals other than going through ‘official’ methods, residents are able to sidestep the government controls to buy foodstuffs from Florida and Miami by trading Bitcoin for bolivars, the local hyperinflated currency.

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Marshall Islands Is Officially Crypto Enabled

The Marshall Islands made its own cryptocurrency, doing away with the US dollar in March, but is unclear as yet if the island’s banking system is ready to adopt it, reports The Verge.

Politically, the Marshall Islands (RMI) is a presidential republic in free association with the United States, with the US providing defence, subsidies, and access to US-based agencies such as the Federal Communications Commission and the United States Postal Service.

Although the new cryptocurrency, the sovereign (SOV), has now officially displaced the US dollar as the official currency, it appears likely that the country’s 53,066 population will continue to use the dollar until banks and credit companies put in place a framework for the currency’s use.

“As a country, we reserve the right to issue a currency in whatever form it is, whether in digital or fiat form,” said David Paul, minister-in-assistance to the president of the Marshall Islands talking to Reuters earlier this year.

Hilda C Heine, the country’s president, was quoted in Finance Magnates as saying, “This is a historic moment for our people, finally issuing and using our own currency, alongside the USD. It is another step of manifesting our national liberty.” The new SOV will have multiple positives, she suggested:

“The RMI will invest the revenues to support its climate change efforts, green energy, healthcare for those still affected by the US nuclear tests, and education. In addition, SOV units will be directly distributed to citizens.”

Although the presale has not been announced officially as yet, the initial offering is reported to be capped at 24 million tokens as a precaution against inflation. The Marshall Islands now joins Venezuela which launched its own national cryptocurrency, the Petro, recently, mainly as a bridge across US sanctions, with US citizens under a presidential ban from investing in it. The bolivar is still in use in the hyperinflated nation.

Several governments, including China, Estonia, Iran, Sweden, and Russia have discussed plans for their own digital currency.

 

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Venezuela Turns to Bitcoin Mining as Hyperinflation Reaches 18,000%

Venezuelans are increasingly turning to Bitcoin mining in order to combat hyperinflation in the South American country, Bloomberg reports.

Caracas has recently become a crypto mining hub, says Daniel Cancel, a reporter and resident, in a report from the capital. Cancel talks of a friend living in the city buying a machine to mine crypto and telling his son to run it round the clock. The result; USD 6 a day. The reporter tells of another friend who had to move his machine due to noise complaints. The most successful, Cancel reports, is a friend that has invested with his family purchasing three machines and is now clearing USD 1,000 a month, which in Caracas is a “small fortune”, he says.

So why are residents of Caracas going to these lengths to provide themselves with any kind of an income?

Under its controversial president, Nicolas Maduro, the country continues to struggle with a hyperinflation rate estimated at 2,400% at the end of 2017, which has skyrocketed to 18,000% in 2018. The crumbling economy is now causing a humanitarian crisis with 600,000 Venezuelans fleeing to neighboring Columbia alone.

Venezuela’s crisis has steadily worsened as a result of lower oil prices, corruption, and a totally mismanaged socialist system, experiencing all but a total collapse of the economy, public services, security, and healthcare, writes the Independent.

Armed gangs and Colombian guerrilla roam the beleaguered nation’s borders. Pro-government militias are terrorizing urban areas, while police stand accused of extrajudicial killings in a country which has now the dubious notoriety of being home to 10 of the world’s most dangerous cities, according to Igarape Institute, a Brazilian think tank which studies violence.

Bitcoin is now recognized as the only way of getting around the country’s currency controls, and bitcoin mining offers Venezuelans a chance to pay for good imported from overseas. Although the process is not sanctioned for individuals other than going through ‘official’ methods, residents are able to sidestep the government controls to buy foodstuffs from Florida and Miami by trading Bitcoin for bolivars, the local hyperinflated currency.

Cancel suggests that even the USD 6 a day his friend was mining is half decent money in the depression hit country, commenting:

“One key to my mining pals’ success: electricity, while spotty, is basically free, the result of an odd combination of hyperinflation and government-mandated utility price freezes. (It’ll cost you 900,000 bolivars—or about USD 0.90 at the black-market rate—for a coffee, pastry, and juice at a cafe, but you can pay your monthly electricity, water, gas, internet and phone bills for about 300,000 bolivars.).”

Cancel maintains that for those residents who haven’t yet fled the borders to Columbia, its all about managing “somehow” to set up a steady flow of revenue in dollars or another foreign currency. “Human beings can adapt to anything” is a line he keeps hearing as his friends continue the daily struggle of life in Caracas.

 

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In Venezuela a Satoshi is Now Worth Far More Than a Bolivar Fuerte, and Venezuelans Are Moving Their Money Into Bitcoin

According to Google’s currency convertor, 1 Satoshi now equals nearly 6 Venezuelan Bolivares Fuertes (VEF). A Satoshi is 1/100 millionth of a Bitcoin (0.00000001), and is the smallest possible unit for the cryptocurrency.

It is remarkable that a Satoshi far exceeds the value of a VEF, and is a good indicator of just how extreme hyper-inflation has gotten in the South American nation. A Satoshi is not a lot of money, only equivalent to 0.000075 USD. One USD is equivalent to a whopping 80,000 VEF, which is quite close to the largest denomination VEF banknote of 100,000.

The economic crisis in Venezuela started under the reign of Hugo Chavez due to overspending and price controls, and drastically deepened in 2014 when the price of oil collapsed since most of Venezuela’s income was from oil drilling.

In order to balance overspending and debts, the government of Venezuela began printing VEF at will, leading to a rapid rise in inflation starting in 2012. By late 2014 the currency lost over 90% of its value, sending the economy into a tailspin as citizens lost their life savings. This is one of the problems Bitcoin was made to solve, since it is decentralized and can’t be printed at will like governments so often do with their local fiat currencies. This characteristic of Bitcoin conserves its monetary value and makes it safer than most fiat currencies in the world.

Inflation rates have been increasing in Venezuela ever since the crisis started in 2012, now exceeding 7,000% annually and on track to reach 13,000% this year according to the United States Department of Labor Statistics. The end result is people using wheelbarrows full of cash to go grocery shopping.

The Venezuelan Bolivar Fuerte is obviously near the point of total collapse and could end up going the way of the Zimbabwean Dollar which was abandoned and became completely worthless in 2015. In Zimbabwe, citizens sought out other currencies to use for their money, mainly the USD, but Bitcoin has become another popular monetary refuge.

Indeed, this past year Bitcoin trading volume in Venezuela has skyrocketed on Localbitcoins, which is a peer to peer Bitcoin trading website. Over 3.9 trillion Bolivares Fuertes were traded for Bitcoin last week on the website, and of course, this doesn’t include all the other Bitcoin transactions outside of the website. Clearly, Venezuelans are moving their money into Bitcoin more so than ever before.

Bitcoin is in a good position to become a primary currency for desperate Venezuelans who have been tortured by years of hyperinflation. While Bitcoin can be quite volatile and sometimes drops overnight, Venezuelans will rest a lot easier at night knowing their money is in Bitcoin since it does not drop each and every night with the consistency or magnitude that the VEF does, and in the long-term Bitcoin has been going up.

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