Venezuela is among the few countries in the world that have been vocal in its adoption of cryptocurrencies. And despite the existence of both hyperinflation and dollarization, the country has been successful so far in its goal to embrace digital currency. Unfortunately, though, these issues – including others – are expected to come into a much bigger picture and potentially affect the country’s economic rebuilding.
Venezuela’s Current Economic Situation
According to the official report, the country’s most outspoken economist has some words to say about the idea of crypto adoption in Venezuela. It is none other than professor Aaron Olmos, who reportedly studied the many reasons relating to the country’s existing dependency on the U.S. dollar.
Olmos is known to be a passionate advocate of the benefits that digital currencies bring. He also talked about the technology for the past two years. More importantly, he was known for spearheading a program specifically focused on blockchain for IESA. The latter, in particular, is known to be the most prominent business college in all of Venezuela.
In an interview, the economist talked about the many challenges of the present economic situation. In particular, he touched about how Bolivar, a devalued currency, is being used as an official currency despite the existence of other alternatives. According to him, the situation is a result of a consequence of years of poor economic management and administration. Even more so, it resulted in a certain crisis in which the use of cryptos has accelerated to some degree, especially since the steady decline of the said national currency.
‘Good Money’ Vs. ‘Bad Money’
He added that Venezuela is in a very complicated situation due to the existence of “good money,” which he refers to as dollar and/or crypto. But despite its availability, there is scarcity because people barely tend to keep it – they do not necessarily plan to spend it. Meanwhile, the country’s “bad money,” which is the Bolivar, continues to be utilized by law.
Olmos also pointed out that, in one way or another, the cash in terms of high denominations is quite limited. Bills in low denominations, on the other hand, come with no acquisition power and are even directly issued by the country’s central bank.
Unfortunately, this process only creates a distortion, which is already evident in the price of goods and services. In fact, this has been the narrative ever since the declined of the production value, which is solely based on the dollars in the internal market.