TL;DR: Data scientist Matt Ahlborg of UsefulTulips.org recently revealed how people in economically desperate places such as Venezuela benefit from cryptocurrency along with more developed countries’ financial technology innovation loopholes. It turns out, US online digital wallet platform Zelle, albeit unwittingly, has become a key factor in allowing a badly needed lifeline for victims of rabid inflation.



Zelle Wallets & Bitcoin Unintentionally Act as a Financial Lifeline

From time to time, articles appear, showing Venezuelans engaging in currency exchange and cryptocurrency hedging. The pattern has been pretty clear for a while now, and less surprising to anyone paying attention. Through a combination of international meddling, economic blockades, political strife, and an avowedly socialist government, one of the hardest working, most resource-rich regions on the planet is dirt poor … and getting worse.

It was thought by cryptocurrency enthusiasts bitcoin and its derivations would take off in the country, and become a shining example of decentralized money’s hack around politicians and governments. That hasn’t happened to anyone’s satisfaction. Getting folks to trust magic internet beans is a tough sell, even if those folks are starving.

What has happened is perhaps what always happens: loopholes provide gateways into small portals to preserve value. At least that’s the contention of data scientist Matt Ahlborg. In an online discussion, he revealed how Venezuelan and other Latin American ex-patriots living in the United States “create Zelle wallets in the US and then allow their family and friends living in Venezuela access and/or take control of the accounts.”

The Informal Economy

US-based Zelle began in 2017 as an outgrowth of several banking conglomerates’ notion to compete with the likes of PayPal and Venmo. Fed by Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, US Bank, Citibank, Wells Fargo, Zelle is a comparatively frictionless way to transfer USD among users.

Even with the Trump administration’s economic crackdown on the country, “Many goods and services can be purchased with Zelle in Venezuela because merchants/counterparties also have access to Zelle wallets,” Ahlborg explained. “Payments done this way occur as part of the informal economy there and are outside of the Venez banking system and untracked by govt there.”

According to Ahlborg, US dollars (USD) in “Zelle wallets sell for more bolivars than any other online wallet, including bitcoin.” It’s a curious premium until consideration is given to how Venezuelans are incorporating crypto into their lives. He believes they do so mostly for its store-of-value (SoV) properties “in USD wallets/banks or USD stablecoins. However, [LocalBitcoins] base trading currency is BTC. So in order to convert their SoV dollars into spendable [bolivars], they must go through a two trade process.”

It appears Venezuelans exchange USD into BTC and then BTC into bolivars (VES). And the same is true from VES to USD, loading VES to BTC and then BTC to USD. Two trades in each case. “As far as I’ve seen, Bitcoin is a vehicle currency to Venezuelans on [LocalBitcoins],” Ahlborg concluded. He also mentioned other peer-to-peer over-the-counter exchanges set their base as USD, which carries obvious problems on an international level for Venezuelans, but so far LocalBitcoins is the exchange of choice.

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