According to the latest research on cryptocurrencies by Venezuela’s most outspoken economist and professor Aaron Olmos, “the adoption of cryptocurrencies has been on the rise in Venezuela. Earlier, it was due to hyperinflation and now due to dollarization which is somehow playing a role in the economic rebuilding of the country.”
In a recent interview with CoinDesk, Aaron Olmos dissected the reasons for the dependency of Venezuela on the US dollar. Olmos is an advocate of the benefits of cryptocurrencies and has disciplined the blockchain technology for over two years. Today, he is leading a program focused on blockchain for IESA, the most prominent business college in Venezuela.
While discussing about the crypto economy and the implications of its adoption, Olmos discussed the challenges of the present economic situation, where a devalued Bolivar is used as an official currency, despite alternatives. It is a decade of poor economic administration that has to lead to a crisis where the use of cryptocurrencies has been rising as the Bolivar’s decline in value sharpens.
He further quoted, “The country is in a complicated situation because ‘good money’ – dollars or cryptocurrency – is available, but it is scarce because people tend to keep it, not spend it. On the other hand our ‘bad money,’ the Bolivar, it’s the one used by law. “
Thus, the cash in high denominations is limited, while bills in low denominations with no acquisition power are issued by the central bank. This has created a distortion in the price of goods and services since the production value is now based on dollars in the internal market. Currently, in Venezuela, the Bolivar is considered the official currency in circulation, but the actual functional currency is the US dollar.
Introduction of a double circulation system is the solution to the country’s economic issues. Moreover, it has become important to reactivate production and create new sources of investment, to overcome its rampant inflation. And, the cryptocurrency is an alternative that can carry a part of the burden in commerce and share it with the Bolivar. Olmos suggests cryptocurrency as a better option while an economic policy takes care of making the Bolivar regain its value and retain its power.
Emphasizing on the ultimate goal of strengthening the value of the Bolivar, Venezuela economist prioritize it to use Bolivar in a digital form. Temporarily, this can be done by recognizing its use and give it some space for development to work correctly. He does not believe that current laws in the Venezuelan Constitution exclude the possibility of using a cryptocurrency for payments as part of a readjustment plan.
From January 10, Venezuela has been working on two visions – economic stability and financial independence. Moreover, in an economic plan for 2019 – 2025 theoretically includes blockchain and cryptocurrency. The country launched a new crypto bill on January 31 which establishes а legal framework for the industry.
Initially, Constituent National Assembly has approved the set of rules for miners, crypto entrepreneurs, and regular traders. The document titled “Constituent Decree on the Integral System of Crypto Assets” contains 63 articles and proposes the concept of a sovereign crypto asset — any currency issued in Venezuela and authorized by the government. The decree further offers necessary licenses for mining entities and crypto exchanges, and charges fines for unlicensed activities.