It wasn't too long ago that some began to question the future of cryptocurrency in Venezuela. With the introduction of the state backed Petro and a commitment by the government to make it more difficult for other coins to compete, speculation over crypto's future in the South American country was to be expected. What wasn't expected is what we are now seeing.
Not only have Petro's competitors not withered in Venezuela, they are actually gaining strength. As evidence, consider the recent decision by Venezuela's largest pharmacy chain to begin accepting Dash payments. This is a big development by any measure.
All-in with Dash
Estimates suggest that nearly half of all the merchants accepting Dash around the world are located in Venezuela. Perhaps no coin other than Bitcoin has such a strong showing there. Dash is doing so well that the Farmarket pharmacy chain is going all-in on it.
CryptoNewsZ reports that Farmarket has teamed up with Panda Exchange to facilitate cryptocurrency payments. The two have come up with a point-of-sale (POS) system that will soon be implemented across the chain's 22 locations in Caracas. That POS system is known as XpayCash. It will work seamlessly with the InstantSend platform owned and operated by Dash to facilitate instant payments.
Reports say that Farmarket stores in Santa Paula, Centro Lido, and CCCT are already accepting Dash payments. It is unclear how long they have been doing so. Nonetheless, the program has apparently been successful enough to lead management to expand across Farmarket's entire network.
Dash to train pharmacy staff
A blog post recently published by Dash says that the Dash organization will send staff to Venezuela to train Farmarket pharmacy staff over the first few months of the program in Caracas. They will also be available to train "general users", which we take to mean consumers who choose to use the POS and pay with Dash.
The need for training does raise some questions about ease-of-use. If the system is so radically different from conventional POS systems, its backers may have a tough time getting more Venezuelan merchants to use it. Only time will tell on that.
If all goes well, the relationship between Farmarket and Panda Exchange may be expanded to include Panda's operations in Colombia. This would have several different benefits, including allowing Colombians to buy medications in Venezuela and have them shipped.
While all of this is being developed it will be interesting to see how the government responds, if they respond at all. One would think that regulators with a mind to limit competing cryptocurrencies would have something to say about the plan. However, it has been quiet thus far.
Venezuela's history of crypto
If you take Petro out of the equation, Dash's success in Venezuela doesn't seem so surprising. The fact is that cryptocurrency has done very well there for years. There would be no reason to expect things to go south barring some sort of government intervention. There has been talk of such intervention, but no real action.
Venezuela's history of cryptocurrency dates back to 2014 when the Venezuelan bolivar hit an official inflation rate of more than 57%. Real inflation was closer to 100% later that year. In essence, economic collapse in Venezuela led to their fiat essentially being worthless.
Hyperinflation has continued in Venezuela ever since. This has led to continued economic contraction and an inability among Venezuelans to obtain U.S. dollars they now cannot afford. It hasn't helped that Venezuelan law has limited access to foreign currencies since 2003.
Always ready to jump in, both Bitcoin and Dash took advantage of hyperinflation. They began aggressively pushing their coins to Venezuelan consumers looking for some sort of store of value. Venezuelans responded. Fortunately, merchants have responded as well - which brings us to the government's decision to introduce Petro some two years ago.
A state-backed cryptocurrency
Venezuela's government was acutely aware of the country's economic problems even five years ago. In 2017, right in the midst of cryptocurrency's rise in Venezuela, they decided something had to be done to prevent consumers from totally abandoning fiat. Government officials announced their plans in December of that year.
What did they come up with? A plan to replace the bolivar with a new digital currency backed by the country's vast petroleum resources. That digital currency was eventually named Petro. Understandably, there was quite a bit of speculation following the government's initial announcement. But in February 2018, Petro was officially launched.
Upon launch, the government made it clear they had plans to clamp down on cryptocurrency and blockchain companies doing business in Venezuela. They made it clear they intended to reduce the circulation of other digital currencies in hopes that consumers would opt for Petro. They also began encouraging businesses to accept Petro payments.
The thinking was that a state-backed cryptocurrency could easily replace the bolivar and restore economic confidence among consumers. There was only one flaw in the plan: consumers weren't buying it. They were not about to put their trust in a digital currency backed by petroleum that Venezuela cannot sell.
Petro is still on the market more than 18 months after its launch. However, it doesn't seem to be functional. Large numbers of merchants are not willing to accept it, and consumers certainly aren't running out to buy coins. For all intents and purposes it would appear as though Petro is now as worthless as the bolivar.
Dash to the rescue
Venezuela's history with Petro explains why Dash is suddenly so big. Dash had a very strong presence well before government leaders tried to create their own state-backed crypto. By all accounts it looks as though Dash never lost any strength. It was as though consumers already using Dash yawned when Petro became available.
In essence, both Dash and Bitcoin are still quite strong in Venezuela because Petro is no more valuable than the bolivar. You could say that Dash, and Bitcoin to some extent, have come to the rescue of Venezuelan consumers who have absolutely no confidence in their own country's currency.
All eyes on the government
All of what we have discussed thus far brings us to the inevitable conclusion that cryptocurrency will continue thriving in Venezuela unless the government makes a concerted effort to stop it. So now all eyes are on Venezuela's leaders. What will they do? Will they continue to pin their hopes to Petro?
Regulators could take the drastic step of banning all cryptocurrencies but Petro. Such a ban probably wouldn't stop people from dabbling in crypto secretly, but it would make it extremely difficult for merchants to accept Dash, Bitcoin, etc. They would be forced to transact using Petro.
Any such move certainly would not help lift Venezuela's economy out of its current state. In fact, things might be made worse. Why? Because currency has no value in and of itself. Currency is simply a representation of economic activity. Where there is no economic activity, money is worthless.
Business requires freedom
Venezuela's number one economic problem right now is state control. When the state moved to take over the country's most profitable asset - the oil industry - it put the country on a collision course with economic disaster. A collapsing oil industry instigated a domino effect that destroyed nearly every part of Venezuela's economy.
The country is still in rough shape today because its government continues to control the oil industry. Until that control is returned to the private sector, very little will change. Attempting to replace the country's fiat with a digital currency is not any sort of real solution.
History has shown us time and again that business requires freedom to flourish. When businesses flourish, so do economies. A strong local business environment makes for a strong local economy. The same is true on a regional and national level.
Petro would have some value behind it if Venezuela's economy wasn't still in the tank. The way out of Venezuela's economic problems is not to expect Petro's artificial value to stimulate economic activity. It is to generate economic activity that will give Petro real value.
Cryptocurrency moving forward
Given the very low chances of Venezuela's leaders changing direction, it looks like Dash and Bitcoin will continue to do very well there. This latest announcement by Farmarket is proof. Even though being Venezuela's largest pharmacy chain puts a regulatory target on their back, company officials believe it is worth taking a risk on Dash.
That is likely how things will be in Venezuela for the foreseeable future. Moving forward, cryptocurrency will continue to offer Venezuelan consumers a store of value that is worth far more than both the bolivar and Petro. It would not be at all surprising to see other merchants follow Farmarket's lead and get on board with Dash, Bitcoin, or both.
Venezuela is an example of a nation in which cryptocurrency actually fulfills its intended purpose. There, Dash and Bitcoin are not seen as investments in the same league as stocks and bonds. Rather, they are monetary systems that allow consumers to transact business with local merchants.