The reason for inventing Bitcoin years ago was to create an efficient and affordable way to send money, buy and sell over the internet. Along the way Bitcoin became a highly valuable, albeit very volatile, commodity and Ethereum became the lynchpin of decentralized finance with its smart contracts. As we wrote a year ago there are issues with sending money with crypto such as finding someone on the receiving end to convert to the local currency. Nevertheless, sending money back home to Venezuela with crypto has become increasingly popular with the Venezuela diaspora created by a non-democratic government whose sole skill set seems to be one of robbing the country of its wealth and driving more than seven million of its citizens out of the country and creating 2,000,000% yearly inflation which has only recently improved to about 20% a year.
How to Send Money Back to the Family in Caracas
More than seven million Venezuelans have left their country in a bit more than a decade. The bulk of them are in neighboring Colombia, Chile, Panama, and Costa Rica but also in the USA. As Latinos working in the USA have traditionally done, these folks are commonly supporting family back home in the capital city of Caracas or elsewhere in the twenty-eight million person country. Traditionally folks have used Western Union, MoneyGram or international banks to send money back home. Problems with this method include fees up to 7%, up to a three day delay in receiving funds in Venezuela, and now a bunch of government restrictions. Alternatively folks send money directly to a business that changes one currency for another. However, the cheapest way if one has blockchain savvy is to use a cryptocurrency like Dogecoin, convert it to a stablecoin like Tether and then to dollars or the local currency. Ideally the family has a bank back in Venezuela that accepts crypto and, in turn, deposits the local currency, the Bolivar, into their bank account. Dogecoin is commonly used because of its relatively lower cost of sending.
How Common Are Crypto Remittances for Venezuelans?
As the sum total of foreign money being sent back to Venezuela has risen to six percent of the country’s GDP crypto remittances have risen to nine percent of the $5.4 billion sent back to the country. The leading sources for all money sent home are Chile, Panama, and Colombia but the leaders in crypto remittances are Colombia followed by Panama and the USA according to a Bloomberg article about crypto remittances.
Crypto As a Store of Value for Venezuelans
As crypto winter showed us, Bitcoin and the rest are currently not a completely reliable way to store wealth when compared to the US dollar. However, in the case of the Venezuelan Bolivar, having your money in Tether and linked to the US dollar has been an excellent way to avoid having your wealth evaporate as inflation rates have been routinely in the 100% range and as high as a million percent back in 2019. For members of the Venezuelan diaspora sending money with crypto and holding as the Tether stablecoin has been a godsend.
Unresolved Crypto Sending Issues
While sending money back home with crypto has been a more efficient and more economical method for many people it does not work for everyone. Not everybody in Venezuela has a tech savvy family member or friend to help with this task. And the places where folks back home need to spend their money, like the local grocery store or utility companies take crypto for payment. Thus the use of this efficient method has been limited to the one to three percent range of all remittances. For this portion to go up we need to see wider adoption of crypto in the mainstream commercial sector.