Venezuela has been in a disastrous state for several years. The country has fallen victim to mass inflation after its native currency, the bolivar, was deemed relatively worthless by the nation’s leading financial authorities. As a result, the prices of necessary survival goods such as food, clothing and water, have shot through the roof. Items like these are relatively inaccessible to many individuals who either don’t have the money or the resources to obtain what they need to keep their families up and healthy.
In addition, many of these products are seemingly rare. It’s not improbable now to hear stories of citizens venturing into their local marketplaces to see all the shelves bare except for a single canned item that’s selling for a ridiculous price given the shortages the country is experiencing. We have often heard tales of residents killing zoo animals for food in a final and desperate attempt to survive. It’s an ugly picture, to say the least.
How Can Crypto Save Venezuela?
For many, the idea of cryptocurrency potentially easing the country’s financial troubles isn’t that far off, and to an extent, the nation has already ventured into this territory through its use of the petro. Introduced in early 2018, the currency is allegedly backed by the country’s many oil reserves, making it something of a “stable coin” in that oil will always be a necessary item for humanity’s ongoing survival.
While not backed by fiat, oil is consistently proving itself as a much-needed resource, though the statement regarding the petro’s backing has led to controversy. No mention of the oil reserves occurs in the petro’s whitepaper, and many believe President Nicolas Maduro has embellished the currency’s abilities and uses. Due to the ongoing controversy, many exchanges do not feature petro trading on their platforms, and U.S. President Donald Trump has banned all petro trading in America.
Changing Ideas Around
Some analysts now believe that the answer is not a separate cryptocurrency, but rather a cryptocurrency service; one that could potentially deliver financial aid to the people through cryptocurrency. The man taking this to heart is Steve Hanke, a hyperinflation expert and professor of applied economics at Johns Hopkins University. He’s teaming up with Air TM in Mexico City and introducing a project entitled “Airdrop Venezuela.”
The goal of the project is to garner roughly $1 million in cryptocurrency donation funds. That money will then be distributed to approximately 100,000 people via Air TM’s trading platform. Hanke states:
“We provide, in effect, a clearinghouse that allows for the exchange of bolivars for dollars and vice versa. This is also very superior to distributing physical cash because you don’t have to run the risk of driving your armored truck into the country.”
Those in Charge Aren’t Helping
It is believed that if Maduro were to tie the bolivar to the U.S. dollar, the inflation issue could be resolved in a relatively short time. Unfortunately, the Venezuelan president and his associates have failed to do so. Presently, inflation in Venezuela exceeds 116,000 percent.
Hanke is confident that the project will demonstrate crypto’s ability to be used as a national, mainstream medium of exchange. He comments:
“You could now have the additional demand for cryptos for use as a medium of exchange versus what you have now, which is only the speculative demand. This experiment would demonstrate wither it could qualify and check that box.”
If the experiment is successful, crypto could be used in everyday transactions, officiating its position as money and not just as a speculative investment tool. In addition, the successful distribution of the crypto donations could officially dollarize Venezuela, which could quickly stabilize the economy.