Venezuela has shown why Bitcoin is an essential tool for freedom. Not only for its people but also for the state itself.
Now, we are no fans of despot dictator Maduro. His autocratic cronyism has led Venezuela into a deep economic crisis despite its vast oil resources.
To combat this, Maduro has attempted to repatriate some of the gold which is currently being held by the Bank of England. Having another state store gold is not unusual. In 2015 it was revealed that Germany had approximately $54 billion dollars’ worth of its gold stored in the US.
With Germany and the US being on more friendly terms, if Germany requested its gold then the likelihood is that the US would send it. However, in the case of Venezuela with its very few allies, a request for taking gold back from UK storage has been flatly denied by the Bank of England.
Now, I hear you ask, where does Bitcoin come into this? Often compared to gold, Bitcoin can provide the same utility as a store of value for nation states. However, unlike gold, if Venezuela held its own private keys there would not be a state in the world that could stop them transacting.
Readers may argue that if they stored their own gold then this would suffice, and Bitcoin would not be necessary. Yet, there are further advantages to Bitcoin. Gold as a fungible metal has three difficulties inherently. It is difficult to transport, expensive to transport as well as a security risk. For these reasons much of the world’s gold has been stored in the highly secure Fort Knox for many years.
Bitcoin being part of a peer-to-peer network solves this issue by allowing any citizen or state to send Bitcoin anywhere in the world in a matter of minutes, hours, or days depending on the transaction and the network fees processed.
Many nation states are investigating having their own cryptocurrency. Venezuela has even released the much derided Petro currency. The Marshall Islands has followed suit as my colleague Darren Parkin recently reported. Yet, rather than this, such states should be examining how best they can add Bitcoin to their own portfolio.
Gold has had its use as a currency for thousands of years. Bitcoin, comparatively, is a still a baby. Despite this, the case of Venezuela and its issues in repatriating their own gold highlights some key advantages of Bitcoin.