Officials in Venezuela are exploiting cryptocurrency trades on remittance service Patria to fill the government’s empty coffers, an economist claims.
Earlier this month, lawmakers in Venezuela launched Patria. The platform allows people from anywhere in the world to send Bitcoin and Litecoin to Venezuelan citizens – with a fixed rate going to the state.
But Carlos Hernández, an economist writing in Caracas Chronicles, says the state is exploiting citizens’ transfers to raise cash.
He wrote: “Taking a page out of the Cuban playbook, the Maduro regime wants to profit from the migrants who have fled communism.”
To test out Patria, he sent $3 worth of Bitcoin to an unnamed person in Venezuela.
The recipient was forced to go on the Patria web page and redeem the money to a bank account. After a week, they still had not received the money.
“In fact, none of the official ways of sending money work well to actually compete with the black market,” he added.
“We redeemed the money in the Patria web page, but it’s been a week and the recipient hasn’t received the Bolivars.
“With 3.5% daily inflation, that’s a deal-breaker.”
The service was launched by the country’s main crypto-asset regulator Sunacrip (the Superintendency of Crypto-assets and Related Activities).
Under the terms and conditions, anyone receiving funds must be of legal age and live in Venezuela.
In December 2017, the government announced the creation of a state-backed cryptocurrency, the Petro.
The cryptocurrency can be acquired using fiat currencies as well as Bitcoin and Ethereum.
In August, Venezuela replaced the old Bolivar Fuerte currency with the Bolivar Soberano (Sovereign Bolivar), which is linked to the Petro coin’s value.
Sanction challenge
The currency, which is backed by Venezuela’s oil and mineral reserves, has been described as a way of circumventing US sanctions and accessing international financing.
Inflation-ravaged South American countries such as Venezuela are seeing Bitcoin trading volumes surge as more and more people adopt cryptocurrency.
In Venezuela, a lot of the increased usage of cryptocurrencies can be credited to the financial crisis the country is currently battling through.
At the moment, Venezuela is experiencing the highest ever recorded level of hyperinflation.
The political situation is volatile. President Nicolás Maduro, derided as a corrupt autocrat, is struggling to maintain control and is being openly challenged by opposition leader Juan Guaidó.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.