Bitcoin May Provide Relief to Venezuelans Amid Increased Sanctions
The Trump administration is considering a move that would squeeze the Maduro regime even tighter with transaction sanctions that would make it impossible for any business to process transactions with entities that recognize the Maduro presidency.
The methodology behind this move requires support from Visa, Mastercard, and other payment processing firms. By sealing off payment processing from the country, upper and middle-class Venezuelans would be hard-pressed to use bank or credit accounts.
The Venezuelan military continues to support Maduro against the US-backed Juan Guaidó. However, by increasing international and sanctions against Maduro supporters, the goal is to increase pressure on the already-distressed government.
The Real Victims
As with all dictatorships, the real victims are always the poor and disenfranchised. The sanctions will likely have the greatest impact on those who are already under extreme duress.
Maduro’s government has come under increased scrutiny for massive human rights violations and liquidation of the country’s gold reserves. Because transaction sanctions would shut down much of the upper and middle-class markets, the poor would be out of work. With less disposable income, the wealthy would be unwilling to spend in normal ways — which would ultimately impact the lower class.
A vast majority of the poor in the country have little to no banking access and rely on day laborer jobs.
Bitcoin to the Rescue
Regardless of what the United States does, a shift toward digital currencies in the country may mean the poor will be protected. Though sanctions restrict normal international transactions, Bitcoin (BTC) transactions would remain functional.
Sanctions have already been used with effectiveness in North Korea, Syria, and Iran. However, in those cases, the nations affected by the sanctions did not yet have significant Bitcoin adoption. Venezuela, on the other hand, has seen a noteworthy increase in Bitcoin adoption — meaning that many, if not all, have heard of and use Bitcoin, to some degree.
The Risk of Increased Regulation
The side danger of this payment bypassing is the risk of increased regulation.
The government is not likely to look kindly on a system that would easily bypass its most stiff regulatory efforts. In fact, the type of fiscal autonomy that Bitcoin provides represents a significant threat to federal initiatives. Trustless systems allow for the movement of funds without trusted third parties — the perfect point to apply pressure and seal off transactional capability.