{"id":21513,"date":"2018-08-30T23:05:09","date_gmt":"2018-08-30T23:05:09","guid":{"rendered":"http:\/\/ci027cfe7a400426c3"},"modified":"2018-08-30T23:05:09","modified_gmt":"2018-08-30T23:05:09","slug":"venezuela-takes-aim-remittances-bitcoiners-take-collateral-damage","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/venezuela-takes-aim-remittances-bitcoiners-take-collateral-damage","title":{"rendered":"As Venezuela Takes Aim at Remittances, Bitcoiners Take Collateral Damage"},"content":{"rendered":"
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The Venezuelan government is cracking down on remittance payments with a new banking mandate, one that could put the country\u2019s Bitcoin users<\/a> on an even tighter leash.<\/p>\n

In a letter \u201caddressed to all banking institutions,\u201d the government has ordered all domestic banks to disclose the IP addresses, financial details, transaction amounts and locations of all citizens who access their banking services from outside the country. <\/p>\n

Per the measure, Venezuelans are expected to \u201cnotify [their] banking institution of [travel] instances prior to [departing], explicitly indicating their destination place(s)\u201d and how long they\u2019ll be out of country, the letter<\/a> reads.<\/p>\n

If a citizen fails to comply with the above stipulations, banks may \u201cenact a special condition that restricts the ability of the client to make online transactions,\u201d effectively locking them out of their bank accounts if they are caught accessing services outside of the county. The bank is then required to \u201creport the policy holder\u2019s name; identification of the resource\/asset; date and place of provenance; date of imposed restriction and the IP address from which access was attempted\u201d to the National Entity of Financial Intelligence.<\/p>\n

\u201cLack of compliance with the above stated,\u201d the letter concludes, \u201cwill result in the imposing of sanctions in accordance with the terms outlined by the legislative decree.\u201d<\/p>\n

An Attempt to Monopolize Money Transfers<\/h3>\n

The measure, self-described as a means to \u201cpreserve the interests of the users and of the general public,\u201d is the government\u2019s attempt to strongarm the community of Venezuelans who migrate to neighboring countries, such as Argentina, to send money home. Their own country\u2019s economy ravaged by hyperinflation<\/a>, these expats seek work abroad in hopes of earning a living wage to support themselves and their loved ones.<\/p>\n

It\u2019s these citizens funneling money back into the country that the government wants to police with its new order.<\/p>\n

\u201cA lot of people are sending money to their relatives in Venezuela and they want a cut of that,\u201d Venezuelan Eduardo G\u00f3mez, head of support at Purse.io<\/a>, told Bitcoin Magazine<\/em>. This strategy, he continued to explain, is much like the Cuban government\u2019s own monopoly over cross-border transaction clearing.<\/p>\n

\u201cIf you look at what Cuba is doing \u2026 the biggest revenue source for Cuba is remittances; it\u2019s all the Cubans living in Florida, in Miami, sending money home to their families. If you want to send money to Cuba, you have to go through the government to sell dollars for Cuban pesos.\u201d<\/p>\n

Venezuelan officials are reaching for the same control. In sanctioning state-approved trading houses, which as G\u00f3mez suggests are in the government\u2019s back pocket, politicians are hoping to reroute all remittances through these institutions to take a cut of payments. The bank order is the means by which the government intends to coerce citizens to use these services.<\/p>\n

And their IP addresses are the leverage. As the order indicates, if a client is caught accessing online banking services abroad, or she fails to report the required information to her bank, then that client could lose banking privileges.<\/p>\n

G\u00f3mez told us that the government has already come down on citizens using middleman services who offer cheaper money transfer services in neighboring countries, citing his siblings\u2019 use of such services in Uruguay. <\/p>\n

This new measure will look to sweep up those they\u2019ve missed, including users of well-known OTC Bitcoin exchange LocalBitcoins<\/a>.<\/p>\n

With Remittances in Sight, Bitcoin Users Caught in Crossfire<\/h3>\n

\u201cBitcoin is a threat to [the government] because people are using LocalBitcoins to trade money around,\u201d G\u00f3mez said.<\/p>\n

While G\u00f3mez admitted that there\u2019s less volume on Latin America\u2019s LocalBitcoins hubs compared to international exchange volumes, he did say that \u201cvolume is increasing,\u201d as it has become a popular remittance option to circumvent government-sanctioned trading houses.<\/p>\n

Expats will even use the service as an alternative to foreign currency transfer intermediaries. Many Venezuelans living and working in Argentina, for example, will convert their Argentinian pesos into bitcoin. Using LocalBitcoins, they\u2019ll search for a Venezuelan trader who uses the same bank as them, something that can be tricky depending on rates, bitcoin-to-bolivar liquidity and transaction size. Once a user finds the right match, they\u2019ll give the buyer their bank account number \u2014 or, in some situations, that of a relative \u2014 and settle the transaction.<\/p>\n

Under the government\u2019s new requirements, Venezuelans who deposit directly into their own bank accounts could be in trouble, G\u00f3mez said, as they could have their banking services shuttered on account of illegal use \u2014 with similar consequences for those buyers transferring the funds. If the measure takes its desired effect, G\u00f3mez believes that it could have damaging ramifications on Bitcoin\u2019s use and LocalBitcoins\u2019s presence among Venezuelans.<\/p>\n

\u201cWhat this means for Bitcoin in the short term is that it could take some liquidity from LocalBitcoins because I have heard some rumors that a lot of Latin American traders for LocalBitcoins are Venezuelans living abroad. A lot of these guys left the country years ago, so what may happen is that a lot of those traders won\u2019t be able to log into their bank accounts.\u201d<\/p>\n

Theoretically, this is easy to overcome. Instead of transferring funds into your own account, for instance, you could have them sent to a relative, instead. G\u00f3mez forecasts this as a likely outcome \u2014 one that, if it causes an uptick in LocalBitcoins\u2019s popularity, could lead the government to shut down domestic access to the platform entirely.<\/p>\n

\u201cIn the long term, the government may restrict LocalBitcoins via something like DNS blocking or IP blocking to restrict access to LocalBitcoins in Venezuela. If they see that a lot of people are using LocalBitcoins to circumvent this IP restriction, then they may see it as a threat.\u201d<\/p>\n

Still, this action would be a long time coming if it\u2019s ever executed, G\u00f3mez predicts, for the same reason why LocalBitcoins is the only cryptocurrency exchange still active in the country: officials use it.<\/p>\n

\u201cA lot of people inside the government use LocalBitcoins to sell their bitcoins that they earn via mining because all of the government officials mine,\u201d he said.<\/p>\n

Even as the Venezuelan police raid local mining<\/a> operations, government officials themselves mine with immunity<\/a>, having bootstrapped their own rigs since the market\u2019s 2017 bull run. Seeing as it\u2019s so popular among officials, G\u00f3mez thinks the government will leave the exchange alone \u2014 for now, at least.<\/p>\n

Bigger Than Bitcoin<\/h3>\n

In our talk, G\u00f3mez indicated that the government\u2019s banking order will no doubt create headaches for Venezuelan Bitcoin users. But by and large, the order is about effecting greater control over all aspects of the economy. Wrangling in Bitcoin users, specifically those sending money across borders, is just one degree of this control.<\/p>\n

\u201cUltimately, the government wants a cut of the pie for remittances,\u201d G\u00f3mez said.<\/p>\n

LocalBitcoins is certainly cutting into the government\u2019s transaction processing profit, but it\u2019s not only used for money transfers. G\u00f3mez also told Bitcoin Magazine<\/em> that Venezuelans use the service to check the bolivar\u2019s rate against the U.S. dollar, which has become a de facto trading standard for many in-country services.<\/p>\n

Venezuelans used to reference DolarToday<\/a>, a popular service for transparent bolivar-dollar rates. But ever since rumors began to spread that the Venezuelan government covertly purchased the domain to control the rates, \u201cLocalBitcoins is becoming the market reference for the dollar,\u201d G\u00f3mez said. Users will refer to the bitcoin-bolivar rate against the bitcoin-dollar rate to arrive at a reliable bolivar-dollar rate.<\/p>\n

The government\u2019s economic war, as G\u00f3mez indicated, is total \u2014 one that looks to tighten the noose around any service or tender that works around officially sanctioned services. Given LocalBitcoins is proving to be a multifaceted tool for those Venezuelans who use it, it\u2019s reasonable to assume that, if its popularity continues to surge, the government may take action.<\/p>\n

If it does, this could completely throttle the last access points Venezuelans have to cryptocurrency platforms and services. G\u00f3mez said that even though LocalBitcoins is the only operable exchange left in the country, \u201cthere\u2019s [still] a lack of liquidity.\u201d <\/p>\n

In the event of this closing, Venezuelans will have yet another hurdle to jump when attempting to use crypto; this would neutralize one of the only economic safe havens citizens have left as the bolivar continues to hemorrhage value. <\/p>\n

\u201cVenezuelan salaries are so low that there\u2019s not even a way for people to buy crypto. To put things into perspective, the average salary in Venezuela for one month of work is $1. Can you imagine that? Working a full month and only earning $1 at the end of it,\u201d G\u00f3mez concluded in our talk.<\/p>\n","protected":false},"excerpt":{"rendered":"

\u201cA lot of people are sending money to their relatives in Venezuela and they want a cut of that,\u201d Venezuelan Eduardo G\u00f3mez tells Bitcoin Magazine in an interview.<\/p>\n","protected":false},"author":3468,"featured_media":21514,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[587,1691,3474,417,283],"class_list":{"0":"post-21513","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-banking","9":"tag-localbitcoins","10":"tag-petro","11":"tag-remittances","12":"tag-venezuela"},"author_data":{"id":3468,"name":"Aaron Van Wirdum And Colin Harper","nicename":"aaron-van-wirdum-and-colin-harper","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/88b6c65a7515990786b1c04473e15469e5b0d0fffef947ed629a60854e1cb426?s=96&d=robohash&r=g"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/as-venezuela-takes-aim-at-remittances.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21513","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3468"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=21513"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21513\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/21514"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=21513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=21513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=21513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}