
Venezuelans turn to Bitcoins to bypass currency controls - rafaelm
http://www.reuters.com/article/2014/10/08/us-venezuela-bitcoin-idUSKCN0HX11O20141008
======
climber_mac
I am from Venezuela.

In case you are wondering how terrible the Venezuelan economy is right now,
think about this: Our biggest denomination bill (100 Bolivares) is not enough
to buy $1 USD [1]; in january 2013 you could buy $14 USD for the same amount.
Also think about the fact that Venezuela has the largest proven oil reserves
in the world [2].

I'm not even going to try to explain the currency exchange and control
mechanisms (CADIVI and SICAD), they are basically operating like a lottery to
select people who will be allowed to buy dollars at the official government
rate. Everyone turns to the black market, but the demand is extremely high,
and the supply barely exists.

Bitcoin won't solve our problems because no one will want to sell for
Bolivares. The bolivar has been devaluated twice in the past two years, which
has decreased it's value by more than 50% when compared to 2013.

Sources:

[1] [https://dolartoday.com/](https://dolartoday.com/)

[2]
[http://en.wikipedia.org/wiki/List_of_countries_by_proven_oil...](http://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves)

~~~
imaginenore
> _because no one will want to sell for Bolivares_

What about tourists? You should encourage tourists to bring bitcoins.

~~~
climber_mac
Tourists generally don't go to Venezuela because the country is extremely
unsafe. The capital, Caracas, is ranked as the second city with the highest
murder rate in the world [1]. There is an extremely low regard for life -
petty criminals will kill you for your phone.

However, we do have some of the most unreal places on the planet! [2]

[1] [http://www.theguardian.com/world/2014/jan/12/violent-
crime-m...](http://www.theguardian.com/world/2014/jan/12/violent-crime-makes-
venezuela-dangerous)

[2]
[http://1.bp.blogspot.com/-4ghbtqN0bRY/TyV8kLJVivI/AAAAAAAABX...](http://1.bp.blogspot.com/-4ghbtqN0bRY/TyV8kLJVivI/AAAAAAAABXU/BOO5nBIrLfY/s1600/angel.png)

~~~
StavrosK
Damn, that's a nice waterfall. Not "worth dying over" nice, but close to it.

~~~
gabzuka
That's the Kerepakupai Vená or Angel Falls, highest waterfall in the world
[1].

[1]
[http://en.wikipedia.org/wiki/Angel_Falls](http://en.wikipedia.org/wiki/Angel_Falls)

------
josu
The problem here is that nobody wants Bolívars (the Venezuelan currency),
since it's almost imposible to convert them back to USD or any other currency.
A sales manager for Marriot was telling me that in Caracas they charge 40$ a
night if you pay with USD or 300$ if you pay with bolívars. So the only people
that would be willing to exchange bitcoins for bolívars would be people who
live in Venezuela. So I assume that supply of bitcoins in Venezuela is really
scarce, and their price should be on pair with black market dollars, so
probably 6-7x the international price.

The only way around this would be if Venezuelans were to mine their own
bitcoins, but given that most of the mining equipment is sold either in USD or
BTC, it's just a catch 22.

So no, there is no bitcoin economy in Venezuela and as long as they keep their
strict capital controls in place, there won't be any kind of economy in
Venezuela.

~~~
FloresHernandez
Actually, is the other way around. It is cheaper to pay in Bolivars than
Dollars. Right now is 9000 Bolivars (Around 90 Dollars) vs. 130 Dollars a
night at the Marriott in Caracas.

It used to be crazy before, if you paid in Bolivars it was only 100 dollars vs
600 dollars if you paid in USD. Fun fact, even if you were paying in Bolivars
way less, you still used to get Marriott points as if you were spending 600
dollars a night, so the quickest way to get a lot of points was staying at the
Caracas Marriott.

Having said that, I have yet to hear about anyone bypassing the regulations by
using bitcoins. Is still not that hard finding someone selling dollars.

~~~
josu
According to the Marriott page, the exchange rate that they apply is
1USD=50VEF [1]. This is 7 times the official exchange rate, on par with what I
was saying. But I haven't been to Venezuela, so I might be missing something.

[1] [http://i.imgur.com/D1wLoQM.png](http://i.imgur.com/D1wLoQM.png)

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cjensen
That's interesting, but I'm pretty sure a physical dollar bill is more useful.
A physical dollar can be used to make purchase stuff locally without a
computer, and is easily accepted for a sale. In the example given in the
article, the only reason the first guy in the article uses bitcoins is to buy
an Amazon gift certificate (denominated in dollars) to buy stuff mail order.

The only real lesson to be had from the Venezuela situation is that far-left
governments suck at basic economics and math. There is no lesson to be had
about bitcoins in _this_ situation.

~~~
imaginenore
Is there lack of computers? Everyone has a smartphone these days. And bitcoin
works over SMS, so you don't even need a smartphone.

~~~
icebraining
_Everyone has a smartphone these days._

In Venezuela? Are you sure?

------
natrius
People have figured out how to hold stable value on blockchains by using them
to issue contracts for difference. You can acquire a token that maintains the
same value as the dollar, backed by people betting on price changes between
the dollar and the blockchain's internal currency.

Volatility isn't a drawback of cryptocurrencies anymore, and it's going to be
entertaining when countries with capital controls discover this.

~~~
Retric
Your forgetting about counter party risk:
[http://www.investopedia.com/terms/c/counterpartyrisk.asp](http://www.investopedia.com/terms/c/counterpartyrisk.asp)

Any time you hand something of value to someone with the expectation for
future gain it's a risk. Suppose they setup two independent companies one
makes major bet's ignoring price drops and another major risks ignoring price
gains. By ignoring the risk they undercut the market. If the market is sable
they make money. And their downside is limited to the value of those tiny
companies plus the loss of one means gains in the other. Should one fail just
start a new one rinse and repeat. In theory you could set things up so either
no movement or any movement was a gain as people first handed you the money
for what amounted to IOU's backed by junk bonds, stocks, tulips, or crypto
currency's.

PS: Do this with 100's of millions$ and you either get rich or end in jail. Do
this with 100's of billions and you often get bailed out.

~~~
natrius
All bets require a margin to be escrowed on the blockchain. If the bet goes
bad, it gets margin called. The bets are also fungible—holders of blockchain
"dollars" can trade them freely instead of relying on the original backer of
the bet. There is effectively no counterparty risk.

~~~
Retric
Just to be clear there are only two types of actual US currency out there. The
paper stuff and a leder of what 'banks' (or governments etc) control
maintained by the FED. So, now you have a seperate DB not actual cash or
physical currency. Which means you have counter party risk. Now if the US
government can decide to insure 3rd party's which is almost as good as cash
but as anyone that has delt with a banking error knows there is a world of
difference between cash and IOU's.

------
joosters
Not long ago, it was the Chinese who were apparently using Bitcoin to bypass
currency controls, and that was to be the 'big thing' that would propel
bitcoin on to greatness.

Now that effect seems to have petered out and the hype has switched
countries... why will it be any different this time?

~~~
mrb
Bitcoin's adoption continues to increase. Make no mistake about this. It is
far from having "petered out": [http://avc.com/2014/10/bitcoin-adoption-
metrics/](http://avc.com/2014/10/bitcoin-adoption-metrics/) More and more
people in China, Venezuela, etc, _are_ using it to bypass currency controls.
The problem was the media was hyping Bitcoin and making it sound like it would
become instantaneously popular overnight. Instead, it is a process that will
take some time. That is all.

If, by "petered out", you were referring to the current downtrend in price,
well IMHO the explanation is much simpler: Bitcoin users are just selling
coins to pay their income taxes, before the IRS deadline of October 15, 2014.
My reasoning is as follow:

(1) a lot of Bitcoin users are American, so they fall under IRS U.S. tax laws

(2) most users realized incredible gains during the 2013 tax year: Bitcoin
went up 5700% from $13 to $750 between January 1 and December 31

(3) 2013 was the first year for which the IRS published official Bitcoin
guidelines ([http://www.irs.gov/pub/irs-
drop/n-14-21.pdf](http://www.irs.gov/pub/irs-drop/n-14-21.pdf)), thereby
enticing many users to pay taxes (and no, unlike what the media like to say, a
lot of us are not anti-government anti-tax punks - we like to stay legal, pay
taxes, and legitimize Bitcoin)

(4) because a lot of Bitcoin users became "accidentally" Bitcoin-rich (with
little or just a normal amount of other USD-based assets), they have no choice
but to sell coins to pay taxes on their Bitcoin gains

Let me tell you I experienced this first-hand: I filed for a tax extension to
pay on October 15 instead of April 15. I knew my taxes would probably be
around $100,000, and when my accountant was done (a few weeks ago), it was
indeed about $100,000 in taxes. I had always been planning to sell coins to
cover this amount, but seeing how much BTC lost value in the last
weeks/months, I decided to scramble and use money from elsewhere to pay for
the taxes. But I am sure that many other Bitcoin users don't have a financial
cushion to be able to pay a bunch of taxes at the last minute. That's why I
theorize the current downtrend is caused by people selling coins to pay for
taxes. In fact, if my theory is right, there should have been a dip around the
time of the first deadline for those who did not apply for an extension (and
had to sell coins to pay taxes by April 15), and there WAS one exactly at this
time! In fact I predicted this dip back in April:
[https://plus.sandbox.google.com/100577178258662783679/posts/...](https://plus.sandbox.google.com/100577178258662783679/posts/UyfTAqPQXua)

~~~
donatj
I'm probably the one that's wrong here but I thought because it was considered
property and not currency you only had to pay taxes when it was used. In fact
your IRS linked PDF seems to agree with me.

~~~
cgjaro
You are, indeed, wrong: taxes are owed the moment coins are mined, even if
they remain unspent or unused, see question Q-8 in
[http://www.irs.gov/pub/irs-drop/n-14-21.pdf](http://www.irs.gov/pub/irs-
drop/n-14-21.pdf)

------
Max_Mustermann
FWIW Venezuelans on reddit and other internet forums are very skeptic about
this. They say it's just a more convoluted way to get USD.

[http://redd.it/2iocr5](http://redd.it/2iocr5)

------
bsbechtel
This is why I think a lot of VCs are investing in the Bitcoin space, and I why
I think there is an extremely bright future for the currency. Many economists
(i.e., Paul Krugman) can't get past the idea that a currency needs to be
backed by a state to be a real currency. That's the most ridiculous claim
ever...currencies existed long before nation-states ever did. Events like this
are proving those economists wrong.

~~~
aba_sababa
I agree with you in that this is an excellent and demonstrably valuable use
case for Bitcoin - we saw the same thing happen in Cyprus with the protests
there.

I don't think I agree about this meaning there will be a bright future for it.
Venezuela and Cyprus are unstable, extremely corrupt governments. Bitcoin
thrives in that environment. A bet on Bitcoin seems to be a bet that those
kinds of environments will endure and are inevitable, which is vaguely
reminiscent of 2nd Amendmenters and the way they want their guns because it'll
help them defend against the "corrupt, evil police state".

The problem is that America isn't _actually_ a corrupt, evil police state and
neither is it truly on the verge of imploding. I would bet against Bitcoin, at
least in America, for this reason.

~~~
jMyles
> America isn't actually a corrupt, evil police state

I won't say evil, because I think most problems in government are attributable
to incompetence, but I think it's a plenty corrupt police state.

~~~
cbd1984
OK, define "police state".

------
totoroisalive
"Insignificant percentage of Venezuelan turn to Bitcoins to bypass currency
controls."

That is a more accurately title.

------
narrator
Bitcoin isn't a bad way to save money if you can't set up an offshore bank
account. Sure beats the local currency.

~~~
GFK_of_xmaspast
How far off its peak is it again? 75%?

~~~
imaginenore
The dollar is around 99% down off its peak. So?

Yo just chose some arbitrary timeline that bitcoin looks bad at. That's bad
logic.

~~~
anigbrowl
Not year-on-year it's not.

~~~
oleganza
Year-over-year bitcoin is up approx. 300% as of today. In fact, it was 90% of
the time in the past 5 years up YOY, except for 5-6 months after 2011th
bubble.

~~~
anigbrowl
I'm pretty sure that won't be true in 6 weeks time.

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dghughes
I recall on the William Shatner sci-fi TV series TekWar people used what
looked like USB thumbdrive which they connected to share credits.

Too bad Bitcoin couldn't be used that way without a smartphone, something
simple and no risk if stolen.

~~~
wyager
>Too bad Bitcoin couldn't be used that way without a smartphone,

I think the minimal secure interface is something like a Trezor, which is
pretty similar to what you describe.

Anything without some kind of confirmation UI can't possibly be secure.

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nyolfen
once again bitcoin proves its primary utility is crime

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kolev
Is this why the price dropped so much? Increased demand? :D

