Bitcoin trade volumes in Venezuela reach new high despite crackdown
Evidence suggests bitcoin is genuinely seeing growing real world use as a censorship-resistant currency.
Bitcoin trading volumes in Venezuela have reached a new all time high on LocalBitcoins for two weeks in a row, in both bitcoin and sovereign bolivar (BS.s, the local currency) amounts.
The week of 2 February 2019 saw about 2,000 BTC change hands on the platform. It was a new all time high at the time, by a hair. Then seven days later, on the week of 9 February, this rose drastically to about 2,500 BTC, smashing the previous week's record.
The timing of the rise is unlikely to be a coincidence, as 9 February also saw Venezuela impose sharp new controls on cryptocurrency remittances.
These include commissions of up to 15% of the total amount sent, and maximum transfers of no more than US$600 equivalent per month.
The new regulations put the National Superintendence of Cryptoactives and Related Activities of Venezuela (SUNACRIP) in charge of cryptocurrency remittances, and empowers it to:
- Limit the amount that can be sent across borders with cryptocurrency and set tariffs.
- Set the current price of bitcoin as applies to a given transaction.
- To monitor cryptocurrency users.
This new ruling, ostensibly aimed at restricting cryptocurrency use in remittances, appears to have triggered a rush to buy bitcoin.
When the SUNACRIP Twitter account published the news, the general reaction from onlookers was a combination of irritation and amusement, with most responders saying bitcoin was beyond regulation, and pointing out that the fees described by the new ruling were a bit on the excessive side.
Judging by the fact that the new rules seem to have triggered a buying spree on LocalBitcoins, it looks like the respondents are right.
LocalBitcoins is a peer to peer bitcoin trading platform, and its facility for in-person cash-in-hand transactions means it's one of the preferred platforms for people who like their bitcoin anonymous. And once the bitcoin is in hand, there's functionally almost no way to prevent someone from sending it directly to anyone, anywhere.
Venezuela wasn't the only country to see a massive rise in LocalBitcoins volume in the last couple of weeks, so whatever's happening might go beyond Venezuela alone.
However, it still stands out, as Venezuela tends to do considerably more volume on LocalBitcoins than most.
But the major increases of the last couple of weeks aren't confined to South America.
Indonesia experienced a tenfold increase (from 10 BTC to 100 BTC last week) in volumes last week, which admittedly might just be one person doing some buying or selling. But overall, most countries saw a spike last week.
There are at least two potential explanations for this major spike.
- Price rises: Cryptocurrency prices rose in the last week, and bitcoin abruptly bounced from about US$3,450 to $3,700. Volatility tends to bring more people into the crypto markets.
- LocalBitcoins implementing more stringent ID requirements: The trading platform has moved towards more stringent ID requirements for users. There are signs that the window of being able to easily buy into cryptocurrency anonymously is closing, and people might be sliding into it while they can.
Real world use
It's easy to forget that stable currency is a luxury, and that governments and their currency can and do collapse. Cryptocurrency has always tended to be disproportionately popular in countries whose current residents learned this lesson the hard way.
Venezuela certainly qualifies.
It's here that bitcoin and other cryptocurrencies are finding practical applications beyond speculation.
It's also worth reiterating that these are all time highs being hit in a number of countries today, even though overall LocalBitcoins as a whole naturally had its to-date heyday in late 2017. This strongly suggests that people are increasingly finding valuable real world use for bitcoin as an actual censorship-resistant currency.
Bitcoin is doing what it was built for.
If it were to die today and tally up all its points, would bitcoin have been a net force for good or bad?
Disclosure: At the time of writing the author holds ETH.