Crypto Is ‘Good’ Money, Better Than Devalued Bolivars: Venezuelan Economist
A Venezuelan economist has said that cryptocurrencies are likely to prove pivotal in the eventual process of rebuilding the country’s shattered economy.
The Venezuelan crypto industry has seen increased adoption of virtual currencies in the last two years. This is mainly due to the skyrocketing inflation and, recently, from the effects of dollarization.
But Professor Aaron Olmos, an outspoken academician who sees value in crypto, says that adoption of cryptocurrencies in Venezuela could help rebuild the economy.
Prof. Olmos has published widely, held multiple interviews and appeared on national television to support crypto and blockchain.
In an interview reported on recently by Coindesk, the economist noted that Venezuela suffered from an economic crisis brought on by years of poor administration. He added that the crisis being witnessed at the moment meant that most people find it prudent to use cryptocurrencies rather than the massively devalued fiat.
Olmos points out a very interesting thing to note: an increasing number of people are using cryptocurrencies even as the Bolivar continues to lose value.
According to him, crypto and the (U.S.) dollars constitute the “good money,” while the greatly devalued Bolivar makes up the “bad money.” The former is available but made scarce due to people choosing to keep it rather than spend.
The oddity has resulted in goods and services being overpriced because production costs are valued in U.S. dollars, which has become the “actual functional currency.”
To the economist, the use of crypto could help correct the distortion, with the sweeping adoption of coins like bitcoin and dash making it all a possibility.
Olmos has suggested that Venezuela could do well to borrow a leaf from what Brazil did in the 1990s- introducing the Unit of Real Value (URV). Along with this, the government could reactivate production and look to create other investment avenues- something that he says could help solve the country’s economic troubles.
He believes that crypto would help strengthen commerce as an alternative, even as the country works on an economic policy targeted at helping the Bolivar reclaim its power and value.
Olmos also noted that the country’s Constitution does not prohibit the cryptocurrency used for payments when taken as a part of the country’s readjustment plans in the face of the economic crisis.
He said that the only thing that needed to be done was to recognize the use of crypto as a payment option and allow it to grow. In the end, all these efforts- including allowing the use of crypto in digital form- could help boost the Bolivar.
However, while in support of cryptocurrencies, Olmos does not think the Petro should be the coin used in the recovery plans.
He noted that the controversial oil-backed cryptocurrency hasn’t been able to work as a result of its structure that is based on three things: interventionism, amassing power, and forced usage.
It is unclear exactly what the Venezuelan government will do, or whether what Prof. Olmos is suggesting will strike a note within an administration with two different ‘visions.’
Venezuela has a yet-to-be-published economic plan for 2019 – 2025, theoretically thought to include insights in the use of blockchain and cryptocurrency.
But interestingly, the administration of Juan Guaidó has not stated any plans with regard to the use of crypto to aid in economic recovery.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.