Venezuela and the VEF Exchange
The DICOM auctions introduced on May 31 were suspended after the August 31 auction, which was voided. As a result of US sanctions and the country’s continuing economic crisis, Venezuela was unable to pay the USD 22 million the auction would have awarded. The suspension of the DICOM auctions has essentially frozen the VEF exchange rate, although the value continues to depreciate on the black market. In recent months the black market value of the Bolivar has rapidly depreciated and is currently over 240,000 to the dollar.
Depreciation of the Bolivar and the Increasing Popularity of Cryptocurrencies
Due to the depreciation of the Bolivar and the difficulty of obtaining hard currency, the use of cryptocurrencies such as Bitcoin is becoming increasingly popular in Venezuela. The recent surge in the value of bitcoin has also made converting Bolivares more appealing to many Venezuelans. Cryptocurrency is also appealing to the government of Venezuela as a way to work around economic sanctions. President Maduro recently announced the creation of the Petro, Venezuela’s own cryptocurrency, backed by natural resources such as oil and gold. As recently as January 9th, the Venezuelan parliament voted against the issuance of the Petro. Whether the Petro finds legitimacy and what impact it will have remains to be seen.
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