Enrique de los Reyes is the president of Venezuela's cryptocurrency business association, CAVEMCRIP. We are sitting in his office at ICEX, the Spanish Institute for Foreign Trade, in Caracas, Venezuela.
For many, cryptocurrencies are a dangerous word when it comes to Venezuela. In 2018, the government launched a cryptocurrency, Petro, that was supposed to be backed by the country's natural resources. However, it soon became tainted by corruption.
The cryptocurrency regulator, SUNACRIP, was forced to completely paralyze operations in March 2023 after a corruption scandal related to another scandal at the state-owned oil company PDVSA. 10 members of SUNACRIP were arrested for embezzling more than $3 million.
Crypto assets have also boomed in Venezuela for various reasons. They play a key role in cross-border transactions, especially since the country is isolated from most international financial institutions. Remittances, a new phenomenon, have become so important that some 7.7 million Venezuelans may now live abroad.
The South American country has also become a leader in cryptocurrency mining, due to its support and wealth in energy sources. However, there are many challenges, if we take into account the recent shortages of electricity and fuel, and the significant environmental impact.
In March 2024, SUNACRIP is expected to resume operations after a comprehensive reorganization. This time, the private sector is expected to play a role in regulation, through the newly formed CAVEMCRIP programme.
Q: What is the role of cryptocurrencies in remittances in Venezuela?
A: They have a very important role, ensuring that you are transferred to anyone almost instantly, at a very low operational cost, 24 hours a day, 365 days a year.
Here in Venezuela, it is often very difficult to exchange currencies or make transactions with international banks. There is also a loss of purchasing power of the bolivar, so instant conversion is very useful.
We have to adapt to new payment mechanisms. Businesses also need it for the same reasons. Without cryptocurrencies, the entire country would be in default. Even our banks are adapting to digital payment systems now.
This sector appears to have grown largely thanks to sanctions. How do crypto assets fit in?
Due to excessive compliance, many financial institutions have stopped operations related to Venezuela, even if there is no direct relationship with the public sector. Cryptocurrencies have become a way to conduct transactions without traditional banks.
People, companies and institutions need to understand that this is not an illegal act or an evasion of sanctions. A company like ours always operates under the law, and we are just working to overcome the side effects of sanctions. The private sector and households should be able to use international banks, but they often cannot.
There is also the use of cryptocurrencies to buy oil and gas, and this is directly related to sanctions, as it trades with PDVSA. So the buyer may not necessarily be a US citizen, but they cannot conduct transactions with Venezuelan state-owned companies, but they can do so using crypto assets. If sanctions continue, we can only expect this sector to grow. However, we have specific laws for the use of crypto assets in the context of sanctions, and this does not mean that we are entering an unregulated area.
How big is the crypto sector?
I can't tell you the exact size, but this is a billion dollar sector in our country. In 2022, official cryptocurrency payments reached $125 million. In 2019, we had nearly $700 million, turning Venezuela into the leading country for crypto assets. Here we are only talking about approved banks and exchange companies.
Of course, you have to take into account all the small and informal exchanges, which do not have licenses, for example, those used to send money transfers. Last year, we performed 2.7 million operations without a licence. Then we had 10,000 encryptions.
In Venezuela, remittances reach 5% of GDP, or about $4 billion in 2022. Of the 33 million Venezuelans, about 10% use crypto assets. With remittances, it has become very important especially in a country like Spain, where we started our business. Nearly 600,000 Venezuelans now live there. This is approximately 10% of the diaspora.
Many exchange offices are not regulated. So, at Bitbase, where I work, we are entering the Venezuelan market and offering a legal path for payments. We are registered and operate in accordance with regulations in Spain and other countries in which we operate.
Cryptocurrency mining is energy intensive. For a while, it was said to have flourished in Venezuela thanks to subsidized costs. However, while electricity is still very cheap, supply has become unreliable in recent years and many companies are building their own generating stations. How is the cryptocurrency sector dealing with this challenge? Do you study its environmental impact?
Electricity is almost free for households and still cheap for businesses, but we already have too many power outages, and businesses cannot operate that way.
To address these challenges, we in the cryptocurrency sector have started investing in solar farms. We have no shortage of sunlight in many parts of the country. We also use natural gas, which Venezuela is now more interested in, where we used to only produce oil. On another level, we have enough capacity to cover more than our hydropower demand, if it operates at its full installed capacity.
Meanwhile, most small generating stations run on gasoline. Aside from the environmental impact, we also faced a shortage of automobile fuel. So it makes sense to take advantage of the renewable energy sources we already have.
Another challenge is that many cryptocurrency mining companies have paralyzed operations, again due to the lack of a legal framework as long as SUNACRIP has been suspended.
You are now the President of CAVEMCRIP. What is your goal as an organization? How does it fit in with the corruption scandals in the regulatory body?
As CAVEMCRIP, we want to restore trust in the cryptocurrency sector. We want to give it the importance and respect it deserves. We have become an essential sector in recent years, and we have tools to offer the general population in their daily lives.
We want to bring together all players in the sector, including banking, mining, education, lawyers, accountants and compliance agents. We also need to integrate with the banking sector. We will be the first and only union to do so.
We stand by regulation that promotes entrepreneurship and the development of the technology sector in this country. Venezuela has the broadest regulatory framework in Latin America. We submit proposals to the regulatory body and invite dialogue.
We are trying to show that we can have an organized and professional sector that has nothing to do with corruption and other illicit activities that occur using crypto assets. We want to invite local and international companies, as we have the potential to be the leading crypto asset country in the region.
You're taking BitBase, a Spanish company, to Venezuela. What are you planning to do here?
I used to live in Spain, but I am from Venezuela and I saw the huge potential of this sector. We are a “Vigital” company, so, in addition to online exchanges, we have physical stores and ATMs where you can buy and sell crypto assets and fiat currencies in a fast, secure and low-cost way. As I said before, this part of our work is very important in a country like Venezuela. That is why we evaluate possible scenarios with exchanges operating within established parameters.
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