Venezuela still relies heavily on crypto remittances, amid economic insecurity and the depreciation of the local currency. Remittances continue despite cutting access to the Binance P2P market.
Venezuela was one of the hotspots for everyday crypto usage, as a hedge against inflation. In 2024, remittances from abroad are one of the main use cases for crypto in the country. Crypto has a small, but growing share in remittances to the country, competing with banks and the bulk effect of unlicensed money transfers.
Chainalysis shows data from retail wallets reaching the country, with crypto making up as much as 9% of all remittances.
The Venezuelan bolivar has lost more than 93% of its value against the US dollar over the last decade. Added to the global inflation, Venezuela has resorted to crypto as a way to store value and circumvent riskier and more expensive remittance options.
In the past few years, estimated remittances made between 3 and 6% of the Venezuelan GDP, similar to other developing countries in the region.
Remittances to Latin America increased rapidly during the post-pandemic years, starting with peak growth in 2021. Only a fraction are in the form of personal remittances. For Latin America, the World Bank notes that remittances are even larger than foreign direct investments.
Venezuela Crypto Remittances Soaring as Size of Diaspora Grows
After the skyrocketing migration crisis, about 30% of Venezuelans began receiving remittances, according to Inter-American Dialogue. The amount transmitted via crypto likely reached a record 9% per Chainalysis. pic.twitter.com/56nMMiRLKh
— matthew sigel, recovering CFA (@matthew_sigel) August 14, 2024
Migration and economic crisis accelerated remittances
Venezuela received up to $5.4B in total remittances in 2023, up from $4.2B in 2022. The funds reach up to 2.5M households, or close to 29% of all Venezuelan citizens. Around 38% of the inflows come from the USA, and are a direct result of growing migration. The migration trend has also affected the remittances profile, with growth for inflows from Mexico.
Venezuela was one of the leading sources of immigrants to the USA, and both cash and crypto remittances reflect the growing size of the diaspora. Venezuelan migration accelerated between 2021 and 2023, with an estimated 7% of the population living abroad.
One of the biggest problems for cash remittances are the relatively high fees. Some remittance channels are unregulated and untraceable, often including predatory pricing.
On average, global remittances pay fees of 6.35%, even for a small sum of $200. The cost of remittances depends on digital and banking infrastructure, and prices are falling slowly. MoneyGram remittances also require up to 7% in fees.
Digital coins, on the other hand, have a much lighter infrastructure, sometimes simply requiring a consumer-side wallet. Swapping crypto for fiat may be an obstacle, but the growing inflow of digital assets shows Venezuela has gained tools to use cryptocurrency for everyday spending.
Venezuela has been one of the early adopters of crypto assets, as well as one of the biggest early miners of Litecoin and Dogecoin. The two currencies are still widely used for remittances due to their low fees, especially in the case of DOGE.
Until recently, Venezuelans could gain access to Binance P2P trading, before a ban on accessing the services. According to local sources, the Venezuelan government is hindering access to the Binance website and mobile app.
Despite this, Venezuela is on the map when it comes to direct crypto spending. Most of the direct crypto locations in Venezuela are concentrated in Caracas and Curacao, but the direct spending of BTC is well-spread across the region.
Venezuelan government moves to crypto despite private bans
The government crackdown on private crypto usage in Venezuela looks paradoxical, given the government’s attempts to circumvent sanctions via crypto usage. The government also had a crackdown on crypto mining in May 2024, confiscating up to 11,000 machines and cutting mining farms off the grid.
Formerly, miners were one of the sources of income, as they sold their BTC or DOGE to offset inflation. As of 2024, Venezuela’s map does not display any Bitcoin nodes following the government ban on mining.
In 2017, the Venezuelan government attempted to introduce the Petro, an ERC-20 token supposedly backed by barrels of crude oil. So far, there is almost no data on actual transfers of the Petro.
In Q2, the state oil company PDVSA announced it would expand the usage of crypto assets to avoid international sanctions. Some of the company’s contracts may contain a crypto payment clause. However, PDVSA is not relying on the Petro asset. Instead, the company tested USDT as a payment tool back in 2023.
Cryptopolitan reporting by Hristina Vasileva
Source: https://www.cryptopolitan.com/venezuela-crypto-remittances-accelerate/