Venezuela and Zimbabwe are currently marked by strong inflation and devaluation of local currencies. In both countries, cryptocurrencies are now being used to deal with the maladministration in the financial system.
Four-fold increase in trading volume in Venezuela
The LocalBitcoin crypto exchange reports a fourfold increase in the volume of cryptocurrency trading since June in Venezuela. This sharp rise reflects the increased demand for cryptocurrencies due to strong inflation.
Despite the absence of state regulation, the trade volume increased from 9 billion to 40 billion Venezuelan Bolivar. The Venezuelan financial system suffered from hyperinflation and the devaluation of the national currency, especially last year.
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As a result, more and more university graduates and young entrepreneurs have turned to the cryptocurrency mining to support their livelihoods and their families. Beside Bitcoin, Dash, ZCash and Etherum were also mined.
However, as there is no regulation in the country so far, the authorities are taking tough action. Already in January of this year, 4 Bitcoin miners were arrested. More than 300 mining computers were confiscated in the border town of Cúcuta.
Chief of Police Douglas Rico stated that the miner’s activities had a strong influence on the consumption and stability of electricity. The economic situation in Venezuela is so disastrous that desperate Venezuelans broke into a zoo in August to eat a horse.
Zimbabwe: Bitcoin is preferred despite extortionate prices
Zimbabwe, the former “breadbasket of Africa”, is in a similar state. In addition to famine, high petrol prices and water scarcity, the country is also experiencing high inflation and currency devaluation.
Here, too, cryptographic currencies are being used, despite exorbitant prices. At the time of publication, the country’s only stock exchange demands $9359 per bitcoin, while the official price is $5921. However, the country’s official currency is currently so weak that the surcharge of over 90% is accepted. This is partly due to the fact that the platform has a still higher payment speed in comparison and overall (excl. inflation losses) costs less than local banks.
In addition, most Zimbabweans who lost their savings during hyperinflation, or whose savings had lost their value, use the crypto exchange to put money aside.
The situation in Venezuela and Zimbabwe once again highlights the growing importance of cryptocurrencies and blockchain technology. By comparison, Bitcoin may still have a volatility similar to that of third world currencies. Nevertheless, it remains to be assumed that the possible reduction of bureaucracy and, above all, cross-border banking will drive the advance of blockchain technology, especially in times of crisis.
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