Stablecoins, especially Tether, have become a main actor in the dollar exchange markets in Latam countries. Venezuelans are harnessing Tether, which commands a market cap of nearly $120 billion, given the large gap between the government’s official dollar exchange, dictated by the volume negotiated in banks, and the black market dollar price, handled in peer-to-peer markets.
The difference between these rates, which in the last month has reached over 20%, has created disruptions in the Venezuelan economy and ramped up the stablecoins adoption as a savings tool, but diminished the use of dollars as a medium of exchange. This is because, in stores and businesses, each dollar can be only received at the official dollar rate, causing potential losses to its users.
While the government injected over $190 million in August to provide liquidity and contain the exchange rate, positioning over $4 billion until October 15, but it has just slowed its rise. This trend has proven to be a burden for the ailing Venezuelan government, which has to spend a significant part of its income to artificially maintain low exchange rates to keep the stability of the national economy.
Tether has been a key player in the Venezuelan exchange rate for some time, given the scarcity of physical dollars in the country. Kevin Hernandez, a local cryptocurrency market analyst, estimates that 76% of the crypto transactions in the country involve USDT. He detailed that the P2P markets manage almost $28 million in USDT each month, showing the strength of the stablecoin in the Venezuelan economy.
“A considerable number of remote workers in Venezuela also receive their salary in USDT, which reinforces their relevance in the economy,” he stressed.
This resonates with the latest Chainalysis Latam Report, which also found that Venezuelans were drawn to stablecoins to combat the plummeting of their fiat currency. This continuous race to maintain their purchasing power has pushed crypto markets up in the country, registering a growth of over 100% from July 2023 to June 2024.
Read more: Chainalysis Latam Report Highlights Major Crypto Growth Milestone in Surprising Nation
Writers’ take: Crypto proponents refer to countries like Argentina and Venezuela to underscore the use case for bitcoin and cryptocurrency as tools that help citizens withstand economic challenges. As long as inflation, exchange controls, and devaluation keep being relevant, stablecoins will be a fundamental escape valve for citizens familiarized with crypto, while others will seek refuge in scarce physical dollars.
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