Bitcoin backed Crytpo-Dollar To Help Venezuelans Counter Hyperinflation and Boost Remittance
Valiu, a Colombian startup with expertise in remittance services has come up with a Bitcoin backed crypto-dollar to help Venezuela get past these troubled times. The new synthetic dollar would help the country to get past its hyperinflation woes and make a cross-border transaction without worrying about the declining value of their national fiat.
Venezuela used to be among the richest nations thanks to its oil and mineral reserves, however continuous power struggle along with corruption in the government led to one of the worst hyper-inflations in the recorded history. The hyperinflation made the national fiat, bolivar almost worthless as its value kept declining every minute.
As a result, citizens stopped using the currency and started to look for alternatives in the form of universal fiats like US Dollar and decentralized currencies such as Bitcoin.
The government also came up with its national digital currency in the form of Petro which was backed by oil, however, the digital currency has been marred into controversy from the beginning. It was reported that the government was forcing merchants to accept Petro at a highly discounted rate which incurred them heavy losses. And now that the oil prices have plumbers across the globe, even Petro looks like a failed attempt.
Can Valiu’s Synthetic Dollar Prove To Be the Alternative Venezuelans Have Been Looking For?
Valiu is now in the testing phase of Bitcoin backed synthetic dollar and the Colombian startup has partnered with Latin America food delivery app Rappi and hoping that when it launched the digital crypto dollar for masses, the partnership would help in expanding the adoption.
Simon Chamorro tweeted about the launch of the testing phase of the cryptodollar and said,
“After 4 months of 80+ hour work weeks, 500k+ lines of clean code written across 4 engineers, shifting the company fully remote due to COVID, and completing a rigorous regulatory analysis … I'm proud to say that Valiu's crypto-dollar is now live and running in Alpha.”
After 4 months of 80+ hour work weeks, 500k+ lines of clean code written across 4 engineers, shifting the company fully remote due to COVID, and completing a rigorous regulatory analysis…
I'm proud to say that Valiu's cryptodollar is now live and running in Alpha. https://t.co/yf6F1jO0Ju
— Simon Chamorro (@simonvaliu) April 23, 2020
Last year the startup has also created a remittance service using which people can send money directly into the bank accounts of Venezuelans. The remittance service has helped 38,000 households up until now to get access to basic amenities such as food and daily supplies. The firm noted that the primary reason for devising a remittance service arose due to the black market that was created amid rising hyperinflation. The informal sector led to a ton of cases of cheating and fraud.
The new Bitcoin backed synthetic dollar is expected to be launched by the end of this year. The cryptodollar has been designed in a way that even people who have no knowledge about the working of the digital assets or Bitcoin can simply deposit cash in one of the thousands of remittance partners of Valiu and receive synthetic dollar in return to their savings account.
The main reason behind creating the synthetic dollar is a continuous loss of value of Bolivar, which made the remittance service launched by Valiu last year of little use as most of the transactions in the country (over 95%) is done in the national fiat, and the first thing that people look to do with the Bolivar is to exchange it against either any foreign currency or goods. However, it is quite difficult to get ones to hand on international currency or Bitcoin in a country which has been plagued by corruption. Thus, the idea of the synthetic dollar came along.
Alejandro Machado, Valiu’s head of research explained why the country needs a synthetic dollar,
“99% of remittances still arrive in bolivars,.Dollars cash hardly makes it across borders, especially in the middle of #COVIDー19 lockdowns.”
Decentralization has Become More Necessity Than Need
After failed attempts at creating their own national digital currency in the form of petro, there were several reports of increased trading activity in Bitcoin. However, the ground reality was far from what the media portrayed. People in Venezuela are not pro decentralization, but more pro-survival. Thus they used Bitcoin and other foreign currency as a bridge currency to exchange against value less Bolivar and survive another day.
Chamorro believes the synthetic dollar could also prove beneficial to the Colombians whose national fiat is also seeing high inflation rates. He also noted that the synthetic dollar would act as a hedge against the hyperinflation and would ensure to keep the value of their earned money intact. The app through which the bitcoin-backed dollar would be light in nature and would only take 14 MB space meaning even the lower end devices can run it.
He also noted that they are fully compliant with the regulators in Columbia and is looking forward to spreading its reach across Latin America. Sid Ramesh, one of the advisors at Valiu said,
“We fundamentally believe the user experience, and the institution around it, should not confuse users or have to go through the norm of having a set of private keys, or having to sync a blockchain node, or doing any of the kind of things you would expect to on traditional crypto applications.”