How many times have I heard, “Bitcoin will bank the un-banked,” or “Bitcoin will liberate the people from oppressive regimes”? Then there are headlines such as this one: “Venezuelans turn to ‘bitcoin mining’ to purchase basic needs.” Really? Have these reporters ever been in any of those countries? Let’s take a closer look at Venezuela, for example.
Inflation there is around 2,300%, and the exchange rate for other currencies is being held up artificially: today, a 10,000 Bolivares note is worth around 1 USD; on the black market, the exchange rate is 255,900 Bolivares for 1 USD. The minimum wage of employees in Venezuela is 797.510 Bolivares, which is less than 3 USD per month (applying the black market exchange rate). Food is increasingly hard to find or afford. And AP reports that an estimated 75 per cent of Venezuelans lost an average of 19 lbs. last year according to one recent survey.
In Venezuela, one Bitcoin currently equals around 2,190,000,000 Bolivares (more or less the same price as that on Coinbase), and a mining-capable used computer costs around 100,000,000 Bolivares. With these numbers, how can one bank the un-banked? The minimum salary is barely enough to buy food, so buying a computer for mining purposes is unthinkable. Who, then, are mining and buying cryptocurrencies in countries like Venezuela? Are they people who have money, who can afford flights to Miami, who can buy good mining equipment, who have USD at their disposal, who have time to trade cryptos?
The problem linked to low minimum salaries applies to most countries, not just to Venezuela. I am only using Venezuela as an example because everybody is speaking about it.
Many Bitcoin maximalists are bound to start screaming. But, in this case, the Bitcoin road is more of a dream. Realistically, it will never be implemented as a replacement for a sovereign currency. So why not start thinking differently? If we are serious about helping the un-banked in many countries, the Bitcoin road is clearly not the correct one. The only way forward involves working together with governments and implementing local currencies as cryptocurrencies. This move will not only make it possible to take advantage of blockchain technologies, but it will also empower governments to start thinking differently.
Some ideas on what is already possible (just from looking at fiscal instruments) follow:
- International transfers without the need for a correspondent bank (this is a huge issue in many countries),
- Reduced costs of operation,
- Faster and more efficient social development and public-sector management with the use of smart contracts,
- Fewer national and international reporting problems (including the monitoring of funnel accounts, money laundering, tax evasion, and suspicious activity reporting),
- New possibilities for raising taxes (for example, the creation of a tax coin),
- Banking to support special projects (for example, housing projects that can be dealt with automatically through smart contracts).
It is time to start rethinking.