Venezuela's Transition to Cryptocurrency Usage Amid Economic Recovery and Hyperinflation Aftermath

• Over half of Venezuela’s population still uses the bolívar for daily transactions despite significant dollarization since 2017.
• Foreign currencies dominate transactions in regions like San Cristóbal; U.S. dollar, Colombian peso, and euro are widely used.

In Venezuela, the journey through severe hyperinflation has led to a multifaceted financial environment where cryptocurrencies play a nuanced role. According to a recent report by Ecoanalítica, slightly more than half of the Venezuelan population continues to use the local currency, the bolívar, for daily transactions despite the predominant dollarization due to the hyperinflation that peaked in 2017. This shift has seen the bolívar deeply sidelined in several regions, with foreign currencies gaining prominence.

The analysis revealed that in San Cristóbal, a notable 79.8% of transactions are conducted in foreign currency, influenced heavily by the Colombian peso. Across Venezuela, the U.S. dollar accounts for 32.7% of transactions, the Colombian peso for 5.7%, the euro for 5.5%, and cryptocurrencies and other forms combined for only 1.2%, as per the data up to February 2024.

The findings, derived from the book “After Hyperinflation: Studies on Money in Venezuela” and discussed at a forum hosted by the Institute of Higher Administration Studies (IESA), highlight the cautious penetration of cryptocurrencies in the nation. Cryptocurrencies are predominantly used not for transactional purposes but as a savings reserve, according to economist Aarón Olmos.

Moreover, the introduction of the new Ecodesign legislation set for 2027 is pushing companies towards modernizing client interactions and embracing the circular economy, potentially increasing the role of digital assets in commercial activities. 

Depending on the region, residents might transact in Colombian pesos, Brazilian reals, or more frequently in U.S. dollars and euros, adapting to the most stable and available options.

“The relationship they have with remittances with their families, currently, is mainly about 60 and 70% crypto digital platforms, and the most used crypto is USDT,” explained Aaron Olmos, during his presentation at the second forum.

Just as we have been talking in Crypto News Flash, remittances play a significant role in the cryptocurrency economy in Venezuela. In 2023 alone, almost $500 million in virtual assets were transferred as remittances, predominantly on crypto platforms, with Tether (USDT) being the most utilized cryptocurrency.