On The Brink with Castle Island - Alejandro Machado (Open Money Initiative) – Contemporary Dollarization in Venezuela (EP.56)

Episode Date: March 23, 2020

Open Money Initiative founder Alejandro Machado joins the show to explain how Bitcoin is actually used in Venezuela, and how the country is dollarizing in real time. In this episode: How a power cut has been linked to a recent dollarization movement in Venezuela, and how dollar usage became decriminalized Whether dollarization has improved the prospects of everyday Venezuelans Why Maduro is actually in favor of partial dollarization How bitcoin allows you to import a system of credible property rights Why bitcoin still has a relatively low level of penetration in Venezuela Why stablecoins have not made a dent in Venezuela so far

Hello and welcome back to On the Brink with Castle Island. I'm Nick Carter. So this is the third episode in our crypto dollarization series, and I hope you've enjoyed it so far. I certainly have enjoyed making it. So today's episode covers a country that's very well known to Bitcoiners. It's the prototypical case of hyperinflation leading to an effective state collapse. So Venezuela was once one of the richest countries in Latin America, and it's been reduced to a state of poverty through mismanagement, poor governance, and of course, hyperinflation. So there's a few monetary phenomena occurring in Venezuela all at once. So first of all, due to hyperinflation, you have the

effective digitization of the bolivar, since it's not efficient to print larger and larger denominations of bills. The government simply cannot keep up. Then you have this informal dollarization movement, which is actually accelerated in recent months for reasons we'll cover in the episode. And then you have the extremely peculiar petro product, which is still ongoing. And then you have the rise to prominence of non-state currencies like Bitcoin. Now, Bitcoiners like to claim the case of Venezuela as vindication for their cause. Local Bitcoin's volumes are certainly very high in Venezuela relative to other countries, but there's more to the story. So to untangle the mess of the petro, the Bolivar, the dollar, Bitcoin, and a host of other currencies filling gross niches in Venezuela, I found one of the

genuine subject matter experts on the topic. So I followed Alejandro Machado's work for a while. He's done some really great stuff at the Open Money Initiative, and I wanted to get him on the show to break down some of these issues. Why is Venezuela dollarizing now? How are cryptocurrencies intertwined with remittances? How do they fit into that picture? Who is trading on local bitcoins? And something I've really wondered about for a while, why is Zell so popular in Venezuela? So in this wide-ranging, conversation. We cover all these topics, many of which I feel Bitcoiners are sometimes naive about. So I really enjoyed this conversation. It cleared a lot of these topics up for me, and I hope you enjoy it as well. Brought down by bad mortgage investments, Lehman, which has 25,000 employees,

will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac. The two. mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin.

Bitcoin. Welcome back to the On the Brink podcast with Castle Island. I'm Nick Carter. And I have the pleasure of having Alejandro Machado on the show today. Alejandro is the head of research at Valueu, and he is the co-founder of the Open Money Initiative. Alejandro, thanks so much for joining the show today. Thanks for having me, Nick. So you are dialing in from Bogota, correct?

That's right, Bogota, Columbia. We have a lot to talk about. The main reason I wanted to talk to you is because I'm exploring this concept of crypto-dollarization, which is a made-up concept, which didn't exist until recently, but it seems to be happening in Venezuela potentially. And you are a local subject matter expert, and I definitely want to dig into that in the way the Bitcoin, dollars are flowing in Venezuela. Before that, though, I'd love to just talk about how you came to be interested in cryptocurrency and, you know, what Bitcoin means to you personally. Sure. So quick recap. I am a computer engineer from one of the university of Simon Bolivar. So I studied there. It's a technical university in Venezuela. And, you know, I was always interested in technology. And I read Hacker News, like obsessively every day. And I think it probably came up in one of the posts, you know. And I read about it, forgot about it. I wasn't really interested in fintech very much. I was much more into educational tech and other stuff. But I

I mean, I remember I read about it, maybe, you know, 2011, 2012. But when I really took an interest was when the government started talking about the petrol, like the Venezuelan government tried to release their own cryptocurrency and it's still, you know, kind of in the works. It's kind of a database that doesn't really work well. But, you know, I thought this is outrageous, right? This is something that goes against the ethos of what a cryptocurrency should be and what Bitcoin stands for because I had read about it before and I wasn't feeling you know this is the future of money back then this was in 2018 like early 2018 I wasn't like thrilled about it I hadn't learned enough

about it but I thought you know this is like what what they're trying to do because the government Venezuela is really evil they tried I thought they were trying to do something completely outrageous which was to control the monetary system completely And that struck me as something, you know, that was really bad. And I started learning more about, you know, what is the alternative? What can we do or what can Venezuela do to counteract this? Because we already have another currency, the local currency of the Bolivar, which, you know, at the time was in very high inflation. And they then became hyperinflationary.

And so we were, you know, the government was trying to replace it with another currency. that they could completely control. And so I went to like the opposite side. So what if we had money that no single entity could control? And what would that look like? I mean, and already this existed, right? And so I just started learning more about it and getting more into it. And so when did you start transacting with Bitcoin or would you consider yourself more

of a cryptocurrency pluralist in terms of not being particularly wedded to a single one? Well, I do prefer using and learning more about Bitcoin because it is the currency that started. It is the first cryptocurrency. It is the most stable in the sense of networked effects and people interested in it. And the rules are very strict. and the minority or like the people who are the core of the community are very intolerant to change. And I think that's a valuable thing. I think that, you know, making changes to monetary policy here and there can result in the opposite of what cryptocurrency was created for.

So I do like experiments like Ethereum and, you know, perhaps one, like some of the newer cryptocurrencies that we were learning about, grin and but but i i think that bitcoin is the most interesting one from a monetary perspective because of you know the the way the you know the hash power is the highest we know that it is the most most likely to be unchangeable over time and it's just very powerful it's a very powerful concept and i don't think it's going to be replaced anytime soon so do you um see it primarily as a monetary innovation or as a tech innovation or are they kind of inescapably linked you need the tech to have the monetary traits well I think both I think both like if you don't have the technological infrastructure to support it then of course you can't use it but the good news is

you don't have to mind to use it you don't have to have like a huge computer now with you know the Lightning Network. I was just trying out this past weekend at a birthday party and I we collected using the Lightning Network where you were using Wallet Dover Satoshi and it's a I think it's a semi-custodial service but it was very fast and we were able to gather donations for for a food hall in Venezuela. It was just like a very powerful thing to be able to collect money boom boom boom boom and then send it over to Venezuela which is a closed monetary system where you can't really transact, you can't really send money into Venezuela unless you do it with a innovation like this or, you know, if you have a contact that has already local currency,

then it gets complicated. So I think that what's interesting is that Bitcoin is itself very unchanging or like the core rules are there, but there's innovation happening on top. And I think that, you know, even in the case of Venezuela where we don't have the best tech, we don't have the best infrastructure, you know, electricity goes out, the internet goes out, especially in the rural areas. I think that you can make it so that it's resilient. You can have money in Venezuela that is more resilient to infrastructural collapse. Maybe Bitcoin, being digital, it has these limitations. But, you know, there's some innovation happening around it.

You know, there are some people working on offline Bitcoin transactions. You could do it over radio. Like since it's not tied to the technology per se, like you don't really have to use the internet to use Bitcoin. There's a project called Locha Mesh by Randy Brito, who also runs, he's the person that runs this foothole that I mentioned. And he is trying to get more people to use Bitcoin in Venezuela by using very low-cost devices, which is, you know, a very, very, very. very long shot, but I think it's a very interesting experiment. And, you know, the dollar bill is the money that is most resilient in Venezuela and the most useful today. And you can't beat the technology of the physical dollar bill. Yeah. Yeah. Right now in Venezuela, that is what works. It works everywhere.

It works every time, you know, provided that you can, that it's not a crumpled bill, that it's not because the people have started to become paranoid about bills that don't look fresh because they're deteriorating and some of them may be fake. But as long as you can verify that, you know, kind of verify that the bill is legit, then it is the money that works best. But I think that having innovation in the space of digital technology, in a place like Venezuela where people are already used to using to transacting with money digitally because the Bolivar, the national currency, has been digital for a very long time because everyone doesn't want to print new bills because that's expensive.

And they have to print more and more and more. Of course, it's better to hit the button and print, you know, 100 million units rather than actually have to physically print them. So people in Minnesota are used to digital payments in many ways. And I think it's a very, very ripe space for innovation and for using digital currency. So before the call, we were talking a little bit about how your, parents and grandparents had always prioritized dollars in terms of denominating their savings accounts. Yeah. So that's kind of the big overarching theme here that, you know, potentially crypto is going to rekindle a spate of dollarization. I'd love just to hear about your family's

history saving in dollars. Sure. So I was mentioning my grandparents from my dad's side, were the first of their families to go to college. They were able to do so because of very generous social policies that Venezuela had because of the all revenue. This was in the early 60s. And they went to college for free and they were able to make a better life for them and their families. And I remember my grandfather used to saving dollars and my dad did too. And from my mom's side, my mom's side is Spanish.

They were Spanish immigrants and they came. came to Venezuela also to seek a better life. And I remember that they too were saving dollars because there was always a perception that the local currency, even though maybe it was more stable in the 60s and 70s, I think after, you know, like in the 80s or perhaps a little bit before, inflation was relatively high. And I remember when I was growing up in the 90s, inflation was still like 30% year over year, which is unthinkable in a, you know, developed country.

So why, if you're part of the middle class and if you're, you know, you're professional, you have, you know the world, you've traveled other places and you can open bank accounts in other places. Why would you stick your money in a currency that, you know, depreciates 30% every year where you can do have a much better alternative? There shouldn't be this barrier to saving. And this is not something that should be exclusive to the middle class. It should be open for everyone. But of course, there are knowledge gaps and there are capability gaps. And there are capability. apps that I think are getting eroded with the internet and with digital money. But, you know, going back to the family's history, I think, and this is like the case for, you know, I would say, almost all of the middle class in Venezuela. And, you know, even, you know, among the, the classes, you know, everyone in Venezuela is aware of the fact that the dollar is valuable. And, you know, it's a desirable thing to have, even though if you don't have a bank account, then you might stashed in dollars under the mattress and you can have that as your savings, emergency savings, right? And so now this problem or this situation where the bolivar, the local currency,

is not valuable, has become extremely, you know, polarizing or extremely, it's become more extreme in the sense that it's not 30% inflation anymore. It's about a million percent. It was about a million percent, I think a couple of years ago. And now hyperinflation, is showing signs of being tamed a little bit because of dollarization, because people are using the dollar and they're just skipping the Bolivar altogether. But, you know, it's something that the government or that the policies that the government has had of printing money, you know, have run their course and people are just sick of it and they're moving to another currency. And has there been anything specific which changed recently? because now we're seeing articles in the press. There's this great publication called the Caracas Chronicles,

which I read pretty frequently. Bloomberg actually covers it too. We're seeing articles about kind of popular dollarization, as Larry White puts it. So kind of bottom-up dollarization. Has anything in particular changed, or has it just been a sense of exhaustion about not wanting to tolerate the Bolivar anymore?

Well, you know, that's very interesting phenomenon that happened last year. There was a big blackout that lasted for about four days in most of the country and in other places. This isn't Caracas where the power almost never goes out because the ruling class is there, and there's elites there, and they want to keep the electricity flowing there all the time. But this time, the government just messed up so badly that the power was out for four days. And so what happened was... Including in Caracas. Including Caracas, yes.

Yeah. And what happened was that people were very afraid of breaking the rules that the government has been building for, you know, decades of monetary controls, of capital controls, of not being able to exchange money without the permission of the government. Even saying dollars in Venezuela, it's kind of a bad word. They say the visa, which means, you know, it's like a foreign currency. They use that as an euphemism for dollars. So it's very interesting and very terrible that people were afraid of even having their dollars out in the open because if a police sees it, even if it's not directly against the law to pay in dollars because it's really not. What was against the law was to exchange money without permission from the government, which is also outrageous. But what the text of the law says matters or should matter.

You know, the police can just take your money and say, oh, this is illegal. I'm just going to seize it, right? And since that didn't happen, you know, the blackout happened, and there was no way to pay for those four days. If you wanted to pay for something. Because the Bolivar at that point was effectively digital, right? Right, exactly, because there was cash scarcity all over the place. Like the only bills that you could get were very small.

You could use it. You could use the bills to pay for public transportation, for example. The banks would only give you, you know, like a dollar's worth of money. each day if you want to go to the ATM, you know, the ATM wasn't working, but you go, you go to your bank branch and they would hand you about a dollar worth of bolivars. And that, that could do you for the day. So anything else that you wanted to buy, you needed to buy it with digital money, with digital bolivars, which usually means debit cards. Minnesota is a country that is mostly banked, you know, about 70, 75% of people have a bank account.

And so they have debit cards and then, you know, mostly they work. You can use them if the banking network is up. But of course, during the blackout, it wasn't. So the only way to pay was to use dollars and dollars cash. So it turned out that a lot of people had dollars, cash, surprise, surprise. And they started to pay each other with that. And then, you know, there was no government backlash. And I think the government had been working on easing their policies before,

but they couldn't prove to the public that they were like really serious about not persecuting the use of dollars. So people are really afraid. But the blackout, I think, kind of forced people into using dollars. And then when they realized, oh, there's no wolf. The danger's not here. Like, you can actually use dollars. Then, you know, started gradually, the country started gradually moving towards using more

and more dollars. So the blackout was a catalytic moment where the window of acceptability opened and normal folks realize that they wouldn't be prosecuted for transacting in dollars. Exactly. Yes, that's what I think. That's fascinating that you can pinpoint these catalysts, but I had noticed an uptick in the coverage around dollarization there. And I suppose there often is a catalyst because it has to take, it's kind of a collective

action problem. You kind of need everybody to switch over at the same time. Yeah, and when there's a element of fear, then I think it takes like a big shock like this to be able to, you know, for people to be able to get their heads together and, you know, change the way that they're behaving. How did people get access to physical dollars in Venezuela? Was it through something like tourism or trade? I'm trying to think how actual physical dollars would make their way into Venezuela. Well, I think for many years, there was this government policy, there was this government body called Kadi that essentially determined who got access to foreign currency and who didn't. And the government used this as a political tool to control and to decide who got the money from the state.

Because, I mean, we were in the oil boom. I think there were about $800 billion that flowed into Venezuela. and most of it now is gone, is unaccounted for. We don't know where it is. It's all gone to corrupt funds and God knows where. But a lot of it, or maybe, you know, these are numbers that are very, very hard to determine. But some of that money was given to people in the means,

in the way of subsidies, right? So they started subsidizing, for example, travel abroad, so you could get an allowance of, let's say, $3,000, there's a year where you could, you know, get that money, so part of that money physically and part of that money as a credit card allowance because your credit card wouldn't work. Your Venezuelan credit card doesn't work abroad unless you have expressed permission from the government to use your bolivars abroad because they controlled the exchange rate.

And if, you know, everyone was able to spend their money freely, of course, the peg would break. And eventually the peg did break, of course. But in order to hold it in order for them to control who has access and who doesn't, they did this. And I think most of the money that was spent or was wasted there was gone to shell companies and, you know, fake companies that invoiced and supposedly imported a lot of goods and food to Venezuela because we've been a country that imports a lot of our food because we have oil. So we have the Dutch disease, right? So yeah, yeah, I think that that during those years, you know, from 2003, when they instituted this exchange controls to 2000.

15, 16 or so, there was relatively, there were relatively easy ways to get access to some dollars, at least, because if you brought your requirements to the bank and showed that you were going to use the dollars for this or for that, you know, they didn't have a way to check, you know, if you were going to use the money for this or for that. So a lot of people, you know, trying to get out of Bolivar, they started saving some of that money in dollars. and they got them cheap, right? They got them at favorable rates. And also a lot of people just did arbitrage with this.

They just bought the cheap dollars and they sold in the black market and then they bought cheap dollars again because they had government connections and they sold it again. So a lot of people got rich this way. Now of people also got rich through the inflation because you could buy, you could get like a huge loan

from a Venezuelan bank in Bolivars and then you could pay it off the next year at like, you know, maybe 2% of what it was worth because of inflation. It had driven down the currency to 2% of its value. Now, this happened like a year or two ago. So there were ways to get dollars into the hands, I mean, into family's hands. People just took advantage of these ways that you could do it and you could have some physical dollars. So, you know, it obviously, the levels of savings varies and the level of access to foreign banking also varies. But it is.

the case that most people in Venezuela today, I think, have at least some access to dollars. And maybe, you know, the majority of Venezuela is not wealthy at the moment. We used to be a wealthy country, not anymore. But, you know, people still have a stash that they keep, you know, at least $5, $10, something. Everyone has a little bit of an emergency fund in dollars. Okay, that makes sense. That's interesting, this concept of taking out a loan. and due to inflation, it depreciates, I'm curious why banks would be issuing those loans. Was there some sort of government decree that they be lending money?

Because it seems like if the counterpart is getting rich, then the bank is losing money. Yeah. I think when that happened, the year that happened, I mean, it's hard to keep track because the government keeps changing policies all the time. But I think banks were mandated to give loans back then. And I think it's because a lot of the customers, clients of the banks are where people that had gotten wealthy with you know ill-begotten money

and they just wanted to multiply their money and this is a very easy way to do it so banks were forced to essentially issue these loans and then when the state was broke then they could no longer force banks to do this because they would like definitely break the the entire system and they obviously couldn't afford to do that so they changed and now credit is very very limited in in Venezuela, like credit cards in Venezuela are limited to like a dollar or something. That's like the limit, like the highest limit of credit card you can find in Venezuela today is about a dollar or two dollars. And this is very, very different from, you know, 10 years ago or even five years ago where

you could have still access to some credit and some cheap credit. So this mandate that existed for a while to force banks to create loans, that was effectively a way for Venezuelan elites to plunder. the balance sheets of the banks, essentially, in concert with inflation. That's kind of the, that's the definition of the cantyllin effect, I think, you know, whereby the spoils of inflation percolate unevenly through society with those who have the best access to the money spigot, they do the best, and then everybody else does the

worse. Yeah, and I think, well, so these people that have got. had access to the loans maybe were, you know, the second, in the second best position, but definitely the best position was to be at the head of the central bank, because you could essentially issue money to yourself. And you could get, I mean, I don't know if this is actually the way that people did it, but if I were the central bank and I were like an evil, you know, person that wanted to control or wanted to just get rich off of the state, why not give myself the Ballywars first before it, it was.

been, you know, percolates into the economy, even before people are aware that there's more while they're circulating. And then I just sell them with like, you know, at the black market rate. And then eventually the economy catches up and the price rises, but I'm already rich. I'm I already got the money. So. And there's, there's effectively a delay there. So that's where you're exploiting. Yeah. Yeah. If you, if you were in charge of the central bank and you could decide where the money is printed too, I think you could do that. You could, you can definitely profit, like loads from that, even more than the people who are connected to the commercial banks and could get access to loans.

So in terms of this dollarization, I know you're not in Venezuela right now, but you're quite nearby, and you probably have reasonably good data on this, what fraction of the transactional economy would you estimate is currently dollarized? Is it even possible to get these kind of estimates. Yeah, so Bloomberg has reported on this, and I think there are some some methodologies that get close to the number. Obviously, it's a very, very hard thing to research, and especially in a place like Venezuela where it is research, it is hard to research to begin with. But I do speak with Venezuela, and I do keep track of the way things are going and, you know, the pollsters and everything. So I think the number I remember is about 60% of trade or like, or transactions.

are being conducted in dollars as the estimation in places like Caracas. In a city of Western Venezuela called Maracao, it was the second biggest city, actually where my grandparents are from. The blackouts have been so severe, and it's kind of ironic because this is where the oil, like the big oil fields used to be or still are. There are oil fields everywhere in Venezuela, but this is a state that was producing a lot of oil and a lot of our electricity comes from thermoelectric and oil-related sources.

Most of it actually comes from the hydroelectric plant in the southeast of the country, so it's very far away. But there have been some attempts at generating electricity from oil. So this oil-rich state has been the hardest hit by the blackouts because it's just very hard to transport electricity. I mean, it's very far away, right?

these are like long decisions and the more that the longer the further you are and and the worse the government it's just harder to maintain the power plans and the and the infrastructure that the power lines to to get the electricity to to this far away state so you know in this state I think they estimated it that the dollar transactions because of what we discussed earlier because people have no other way to pay except in physical cash and physical cash essentially means dollars in Venezuela today is about 85% or more. So there are some places where there's more dollar transactions, some places where there's less.

I would assume that in places that are very, very poor, that don't have easy access to dollars as much as in the rest of the country. They still use Bolivars and things are still at a price that is not consistent with the rest of the country. So there may be a little bit more cash going around. But at this point, people, are paying with the dollar you can use everywhere and people are paying you know

sometimes with gold you know there there's a lot of illegal mining of gold in the southeast of the country this the state where I mentioned where electricity kind of mostly comes from we have we have like they're very beautiful lush national parks that are there that you know are part of the Amazon and there it's like pristine and amazing and you know the government's kind of slundering all of this because the oil revenue is no longer enough. They don't have competent people, neither in the electricity sector or in the oil sector, you know, people are leaving and, you know, they don't want to be associated with the government.

So, and since they control all of these industries, people are in these states and in these areas, they're, you know, doing illegal gold mining, they're doing like illegal, you know, narco trade and then this and that. So they have alternative services of revenue. And so people are paying each other with like grams of gold or maybe, you know, even cocaine or, you know, Brazilian reals, which are close to the border. Near the border with Colombia, they're paying with Colombian pesos. So there's a lot of different ways that you can exchange value without using the Bolivar. But, you know, the Bolivar remains the currency that is the most widespread and that this is why still people use it and use the electronic form of it. Oh, that's fascinating.

So we have not just the dollar as an alternative currency, but a whole host of other potential currencies, the Real, the Colombian peso. But these are way more regional and more limited. If you want to pay in Venezuela anywhere, you have to use, well, you can use the U.S. dollar. You don't really have to. If you have the right amount of Bolivars, you can buy most things, except like big ticket items, for example. And this has been the case for a long time. If you wanted to buy an apartment or if you want to buy a car, you typically have to. have a document that says the amount in Bolivars, but you rip it apart and you actually do

the transaction in dollars. Like you rip the check, like you don't actually conduct the transaction in Bolivars, but you conduct it in dollars. And how would it work though for a big ticket out, a big ticket item that you would have to finance, for instance, or is it much more limited in terms of you just have to stump up 100% of the cash up front? Yeah, that's a really good question. I don't know how my parents got bought their apartment because I'm pretty sure that they had to borrow money for it. I think back then maybe the down payment was in dollars and then you could ask the bank for the rest. And there was a mix of both currencies. But I think now, if you don't have the money up front, I don't think you can buy an apartment anymore. Yeah. So I guess that's one way

that inflation really ravages the society. It eliminates the predictability, which is required for these longer term kind of like transactions which require financing, I guess no one would be willing to lend. So you just don't have the opportunity to finance things, which is kind of robbed society of its productive capital. Yeah, you can't trust the future. That's a good way to put it. So given that other states in Latin America have dollarized and in some cases successfully I would say, you know, Ecuador is probably someone considered a success story. There are strong welfare gains which accrued to citizens. Post-dollarization, inflation was stabilized. It seems to be doing relatively well. Are you optimistic now that Venezuela seems to have turned the corner and gone for, you know,

at least partial dollarization? Is this cause for optimism or is that just hard to find these days. Well, so it is, that's a great question and it's something that I think about all the time because, you know, in Venezuela right now, things seem to be getting slightly better. I mean, the economic opening has created opportunities for businesses to open and for people to flourish in some limited ways. But we have to remember that the government is still in power. There's, there's authoritarian, there's very, very authoritarian government still in power and they're willing to do whatever it takes to retain that power. And so, for example, they're starting to tax transactions that are not, that are, that are,

they're doing an, putting an additional tax on transactions that are not in Bolivars or Petros. So if you are, well, this is like really hard to enforce, right? Because you would have to have auditors everywhere in the country. But, you know, they, they still can, you know, access the, the means of violence. to coerce people into doing things, and they still have the element of fear, right? Like the same fear that prevented people from saying or from transacting dollars in the first place, that is still intact. They still have the armed forces with them.

They still have, you know, local power and local sources of money that fund this terror and this power. So, and you have to remember that dollarization is not not the same in Ecuador as in Venezuela because it's not official, right? Like, Maduro has welcomed dollarization, if you will, that he's, even said on TV that he appreciates it because, you know, it's palpable in the streets. You can see that people are getting slightly better because there are some things that a stable currency gives you, even if the country is not doing super well and it's not. Like Venezuela is at, I think, 1944 GDP per capita levels at the moment, which is insane.

We've regressed to 1944. But, you know, people feel this, you know, feeling that, you know, you can trust a little bit more of the future because you have a stable currency and because, you know, prices still rise and, you know, there is uncertainty and this is why still there is high inflation even with dollarization, but I think most of the uncertainty comes from the people in power. What are they going to do next? What is going to be the next control? So, for example, people don't, they can't trust their money to be in bank accounts. And this is going to be the next problem in Venezuela. It's already happening now. you can have dollars under your mattress or you can stash dollars in vaults but you can't really trust banks to keep your money for you and it's not because of the banks it's because of the government at any time the government can decide okay you know all these dollars that you deposited they're going to be converted into petros so good luck with that or they're going to be converted to bolivar so they're going to be whatever like we're going to take for 30% of it because of a new tax whatever they can do whatever and you won't be able to withdraw your dollars from the bank branch yeah so they'll effectively be confiscated

Exactly. There is no trust in the banking system in this way. And it's, again, not because of the banking system, there are some fantastic banks in Venezuela, but because of the regulator and what is on top of the banks controlling the financial system. So a parallel financial system is obviously very interesting. And this is the exact reason why I got into Bitcoin and into cryptocurrency. It's because what if you have a government that is actively hostile against society and against people's ability. to hold the money and to use money, then you're better off relying on a system that doesn't depend on the government's ability to shut it down. You're through using Bitcoin, you effectively import a system of property rights, which are actually credible, actually trustworthy. Yes, as long as you can use it.

It's a big barrier for most people. They're not used to controlling their keys and transacting with just a phone and keeping track of the money that they have in different places. And, you know, it's still not something that is in the mental model of most people. And I work with this directly because I'm a product designer. And I'm working now at this company value doing research. So after I did computer science, I did a master's in human computer interaction. So this is, you know, the core of what I do every day is to try to understand how people,

relate to technology and how we can make it easier to use. And it is a fact that Bitcoin is still not very easy to use. And that's not the only problem. Like people always cite this, oh, there's a problem with usability, but there's also a problem about liquidity. And the problem with liquidity is that people are don't, don't trust, they don't know enough and they don't trust it enough to, to use it as a credible alternative. They have the dollar and people, you know, for decades and getting used to new forms of money, I think is something that takes decades. And for decades at least, people have seen the dollar as that standard that they can look up to and say, okay, this is what a stable currency looks like. And so I think that people in Venezuela are starting to see the benefits of belonging or having a foot in other systems.

And that other system doesn't necessarily have to be Bitcoin, right? It can be, for example, there's a lot of people in Venezuela, not a lot, but about the 5% of people who still, you know, are kind of, middle class and getting by or maybe are, you know, owners of big companies, private companies that it has still, you know, been, you know, tolerated by government or they've been still, they've been able to make do with crazy rules that the government has imposed. And these people have bank accounts abroad, you know, like my parents, my grandparents, they try to open accounts elsewhere. And so you can transact in another system. You can have a bank account in the U.S. and if you also have no banking in the U.S.,

I can send you money in the U.S. banking system, and that is something that the government of Venezuela cannot control. They probably don't even know that it's happening unless they start really filtering, you know, like seeing what packets go on their local networks and so on. Yeah. But, you know, it's the idea that you... It's actually, when we were talking about this on Twitter,

I think yesterday, it was an interesting debate with Bid McCormack and other people that got into the... the action, I think Eric Wall was also there. You know, people do care about censorship-resistant money. They just don't know that they care about censorship-resistant money. And for them, you know, using Zell, using like the banking system in the U.S. is a way to hold dollars electronically, in this case, that the government cannot confiscate. So I would rather keep my money in a U.S. bank account or a European bank account or, you know, a Panamanian bank account.

rather than holding in a local bank account where I can't really do anything with it because I know that even though the government can give me assurances over time that they will not confess again and so on they always have they have a history of doing so and so why would I trust them this time and so you know the dollar the dollar abroad or the banking system broad that you can trust like if you trust the US banking system which a lot of people do then you know this is a way for to have censorship persistent money and other ways to have cash right like who's who's in a sense for your cash transactions. It's practically impossible. And another way to do it is to have Bitcoin. And this is a way that you can move money in and out of Venezuela without necessarily

having, like what if I don't have a US banker on? I'd never been able to travel to the US. I don't have a US visa. But there is this asset that is on the internet that I can access because there's, there are platforms that local Bitcoins, you know, that let me trade locally between people, between the local banking system and a system that the state cannot control, which is the Bitcoin network. So that is very, very powerful thing. Yeah, one thing that you mentioned is so interesting. It reminds me of other episodes of dollarization, which failed, is this notion of the local banks not being trustworthy or being plundered, not because of a problem with the banks per se, but because the government uses them as a piggy bank, essentially.

this also happened in Zimbabwe where you had a dollarization episode. People took dollars and put them in the bank. And then the Zimbabwe government converted them into IOUs. The Zolr. Yeah, the Zoller. And it traded at 60 cents on the dollar. It wasn't exactly a dollar. You couldn't withdraw your dollar.

So it was kind of a one-way ticket, you know, like a hotel, California. You know, you can check and you can never leave. Was a government stable coin that was not so stable? effectively, you know, a tether with, you know, with very weak assurances. And so, you know, one thing that this makes me wonder about is the potential for stable coin infiltration, perhaps, you know, because in that case, you have a dollar claim or essentially a dollar IOU, which is a claim on an overseas bank account. and it's using the public key cryptography similar to Bitcoin.

It's a very strong claim and you can custody it on your phone. But it seems that there's very, very little uptake for any stable coins in Venezuela right now. I'm curious to your views on that and why that might be. Yeah. So when it comes to cryptocurrency in Venezuela, Bitcoin is king. Bitcoin has a volume of about, I want to say, $5 million a week, I think, and just in local bitcoins. Of course, there are trading groups that are private and we can't know how much agents act, but it's a pretty healthy volume for a country of 30 million people.

And, you know, there is correlation between the volume of local bitcoins in Venezuela and in Colombia, and they're working on a piece with Matt Alberg. going to publish under the Open Money Initiative that basically shows, you know, these correlations and very interesting observations about how Bitcoin is actually being used for remittances, right? And I think that, you know, Bitcoin was, again, the first cryptocurrency and has been around for the longest and people have become used to trading it and they've become used to the platforms that support it. So there's a lot of people in Minnesota that don't know how to use a wallet, but they know how to use local bitcoins. They know only have to use local bitcoins. They know only

how to use that and they use that as their way to make money. So they convert from Bitcoin into Bolivars very quickly. You know, it takes like five minutes. I've sent money to my family in five minutes using local Bitcons. It's super easy if you know how to do it. And so there's people that don't know anything else about it. They just use that. So local Bitcoin is in all since only supports Bitcoin and it's such a great product really. Like if you know how to use it, if you can use a desktop computer, you know, there are many ways that they could improve and they could make it more mobile friendly. They could open it up for more people, like reduce the complexity. But It works for a specific niche and if you're in that niche, you're golden.

And so since Bitcoin is this a Bitcoin only product, there is a lot of limitation to other cryptocurrencies the way that they can be used. So I think one thing is the protocols that you can use and another thing is the products that support the protocols, which is actually what people care about. People don't care about protocols. They care about products. So if you had products in Venezuela that used stable coins, reliable, you know, very trustworthy stablecoins that over time could become liquid, you could gradually, you know, work on stable coin adoption in Venezuela. And I know that many of the people that trade Bitcoin are trading Tether right now.

And Tether, it's also because it's very easy to convert into Bitcoin and not. And some of these people don't care about how shady Tether might be. So there is some adoption of that in that sense. And some people maybe trade tethers for Zell dollars or Panama dollars or whatever. So there is a little bit of that. But there hasn't been a moment or a stable coin that has claimed the throne yet. And it's interesting. I think it's an opportunity.

I think, you know, if people can reliably convert a dollar stable digital asset into Bolivars, and vice versa. Or maybe not it's not into voluvers. Maybe it's a thing that you have to work on merchant adoption. If people are starting to accept it as money, as they, like some merchants accept Zell as money and accept, you know, Panama bank accounts, for example, like if I do a transaction with you, or maybe even like in the, in Caracas, there's a Chinese community and they pay it with WeChat, right? So there are many ways to transact outside the Venezuelan banking. system. And so if you can make it so that people in Venezuela can access a foreign jurisdiction or a virtual jurisdiction, be it with a stable coin that's based on Bitcoin and Bitcoin Future, for example, what kind of what Abra was trying to do, or, you know, be it, die, or be it, whatever it is, there needs to be like a reliable and consistent effort from companies

like that, you know, are getting, like looking to get into this business to actually, actually make, you know, adoption, you know, like quote unquote, you know, the thing we're always kind of striving for. And, you know, if you want that, if you want people to be able to access, there needs to be a concerted effort to do it. And I think we're starting to see the seeds of that. And it's going to be, and it's a very interesting year in that sense. So I often hear Zell mentioned in the context of Venezuela. And this is shocking to me because In the U.S., everybody makes fun of Zelle. It's like, oh, I don't know anyone that's ever used Zell.

Like, it's all this consortium big banks. They spent all this money on ads. And, like, nobody uses Zell. In the U.S., I think Venmo and Cash App are probably the most popular peer-to-peer networks. Obviously, they don't really work abroad. What is it about Zell in particular that has captured the imagination of the, I guess it would probably be more Venezuelan-Midal class, folks? Yeah. What you say?

Well, so you know what? I think, you know, in Venezuela, I've used Venmo to pay. And, you know, young people can use Venmo. Like, they, you know, it's hip and cool and you can use it. It's, I think it's more user-friendly. And, like, it has a brand of its own. It's like, it also, like, being in the U.S. And then, like, having lived in the U.S. for short periods,

I have gotten used to the way that people pay each other with Venmo. I think it's like mostly a young thing. But I think what happened in Venezuela was, like, was that the people had dollars where the slightly older people that maybe don't trust the Venmo brand and they trust the banks brand. And because Zell doesn't have a, well, I think now they have an apple of their own,

but it's not very popular. I think the whole premise of Zell was use your online banking system to transact with other banks for free. And so I as a person who's like 45 or older feel much more confident longing into my bank And, you know, you see the familiar interface that I'm used to, we've seen the logo of my bank, you know, where I've always stored my money, where I trust,

and then using the bank systems to transact with other banks or with other people. And I can do it easily through Zelle because you only require a mobile phone or an email address. So if I have that access to that bank account, I think it's about that. I think it's about the branding. It's about the way that it's become. reliable. Now it's a networked effect. Now even young people are signing up for Zell accounts and they are using Zell to pay each other and to pay in restaurants. This is obviously a very upper middle class phenomenon of Venezuela right now. And it's relatively recent that people have started to

take off Zell payments. And it's because of what we were discussing that there's no longer that fear of using the dollar, be it digital or physical. I think that's the most praise I've ever heard for Zell in my life. I mean, it works. It works. well. I know that some Venezuelans have had problems with their accounts because I mean, we have to remember that Zell is still subject to the US banking system, of course, and there is over-policing and over-compliance, you know, things that are going on in there. And even though, of course, you know, I wholly support sanctioning individuals who are morally corrupt and who have stolen from Venezuela's, you know, resources and I support, you know, we should punish those

people and I think sanctions are a very effective way to punish them. And so I would not endorse, you know, transacting with people who have had that like illegitimate access to funds. And I think they, you know, it's it's accomplished subjects. We can get on topic of sanctions if you went. But I think that, you know, the reason why Zell accounts, you know, have started, like, people have started to become nervous about who they transact with. I think it's not healthy. And the reason is because there are sanctions and individuals and you can never really know for sure how many degrees of separation there are between you and a sanctioned individual. And if you conduct a transaction with your friend, your friend of your friend of your friend is, you know, somehow tied to a sanctioned individual. then you might be in trouble for association

where you maybe don't know about it. And so there's no transparency in how the banking system works and how the banking police works. So I think it's a very unhealthy thing. Like people are starting to be suspicious of paying each other with Zell in some cases. If you are in an environment where, you know,

I don't associate myself with, you know, people who have stolen from my country. And so I feel pretty confident about using Zelle in Venezuela in places, you know, where I know, I kind of know who the owner is like kind of or you know I've heard good things about it but you can never rely on this intuition alone because you you might think you know that this place it comes from clean money and it turns out later there was an investigation and it showed that it was tied to some

chavismo links and then you know you actually transacted with an estate like individual that that was that was sanctioned right so this panic this you know idea that you can never know when you're going to be cut off from your access to banking in the U.S. is something that's terrifying, right? And so this is again where censorship resistance systems come into the action and actually are very interesting. That's such an interesting phenomenon. I mean, this notion of guilt by association, even if it's three steps removed, definitely reminds me of the kind of chain analysis issue of taint in Bitcoin. But here we have it as a function of the fact that there is sanctions in the U.S. banking system against certain Venezuelan individuals.

So now everyone is suspicious of everyone if they're using that U.S. banking system. And how did they, for the most part, I guess you're saying this is the middle number class, how did they get access to the U.S. banking system in the first place, given it to the closed right now? It used to be a lot easier to open accounts in the U.S. I mean, I myself opened an account in the U.S. when I was 21, and I just did. didn't think about it. I was just traveling. I wasn't even going to live there. I was in college in Venezuela, and we went for a trip to visit family. And, you know, we had the opportunity. We just walked into a bank branch and I opened my account as a tourist, and it was easy. This is 2011, I think. And so, you know, if you can travel to easy, if you can get a U.S. visa and go there and, you know, why not? It's an account that you have. you have to keep a minimum balance.

I think back there was like $1,500, which was not that much. So my parents put it in there, and I just didn't touch the money. And it was my savings. You know, I had that money. And I had my foot in the financial system that they perceived as more stable, right? And a lot of people did this. And this was like a very normal thing to do. And it relates to the fact that the U.S. banking system is rock solid, you know,

relatively compared to Venezuela, of course. And, you know, people had this idea that saving dollars was a good thing. So why not do it? That makes sense. So the fact that it was relatively open meant that if you had the affluence and ability to travel abroad, you could effectively get a piece of the U.S. banking system. Yeah. And again, Venezuela was mostly a country of middle class people that could afford to go abroad

and could, you know, open accounts. you didn't have to own a business of you don't even have to have, you know, $100,000 in assets to travel to you as and do this. Like you could do this on a salary of $2,000 a month or so. It's, it wasn't a big deal. So on the topic of local bitcoins, you touched on it earlier. A lot of Bitcoiners have become interested in this. They look at the local Bitcoin's data because there's actually reasonably good data.

You have it on Matt Alborg site on Coin Dance. obviously it doesn't capture every point of ingress and egress for Bitcoin into Venezuela. But I guess it's maybe directionally accurate. And lots of people cheerlead it. They say, well, this is evidence that Venezuela is adopting Bitcoin. And then I guess the reality is maybe a little more nuanced. So it seems that a lot of the usage of local bitcoins, it uses Bitcoin as kind of a bridge currency or a pass-through currency,

to import dollars into the country. Is that an accurate way to describe it? Yes, either to import dollars or for reminences. I think also if you're in Colombia, you can buy Bitcoin here and you can sell it in Venezuela, and that's a way that you can transform your Colombian pesos into Bolivars. You use Bitcoin as an intermediary currency, and people do this in Peru.

They do it in Chile. They do in Argentina. They do in Mexico. And you don't, yeah, it is a good conduit for, for converting into Bolivars because remember that the banking system in Venezuela, the banks in Venezuela have not been talking to banks abroad since 2003. You can't just send a wire into a Venezuelan account. It doesn't exist.

Well, it doesn't work. So both to get money into the country and to get money out of the country, like let's say if you are getting paid or like if you're mining Bitcoin, for example, and you are earning some of your money in Bitcoin, then, you know, you can use local Bitcoin. to convert that part of that Bitcoin to Bolivars for your local expenses, and then maybe you have a bank account abroad in Europe, let's say, and you just use Bitcoin to convert then again to euros.

So I don't think there's a lot of people that are holding Bitcoin or using Bitcoin as a savings and mechanism long-term. There are certainly people that are. And we actually at the Open Money Initiative, when we did the research last year, which we found, we spoke with a woman, a young woman from my university who became a Bitcoin miner and was, you know, saving, because she didn't have a bank account abroad. Her parents hadn't taken her abroad and then opened her account. And, you know, the family just didn't have a way to access outside monetary systems. So she was the banker of the family. And the way

that she stored money was just using straight Bitcoin. And she knew that it was volatile, but it was less volatile than the Bolivar. So she had her savings there. But I think, most people what they use Bitcoin for is they have a hedge position, they have a rational position on Bitcoin and they have other assets and they use Bitcoin as working capital to turn Bolivars into other currencies and other currencies into Bolivars. And so the main transactors on local bitcoins, are those specialized entities? Are those the equivalent of OTC desks that bundle up many transactions? Yeah, are there one-man operations or, you know, OTCs that work in in some, you know, group capacity.

I've heard there's a lot of Chinese immigrants that use local bitcoins, and there are some accusations by other trades that they've taken over the market, and now they're manipulating price and so on. I mean, I have no way to check that. There are certainly, if you go to local Bitcoin Venezuela, there are a lot of users that you can check, you know, their interface in which they access local Bitcoins. It's in simplified Chinese.

So this means that they are probably Chinese and they have ties with mainland China. They have plus 86 phone numbers that are verified. So again, there's another tie to mail in China. So this is kind of intriguing to me and it's something that I want to research more about because I mean, I was growing up in Valencia where there's a big Chinese community, my best friend growing up was Chinese,

and well, he's from Hong Kong, right? And so I'm more familiar with, you know, Cantonese immigrants to Venezuela, but I wasn't aware that there was a number of people, maybe more in Caracas where I didn't grow up in Caracas. I was just in your university there. So there's maybe more people that have ties with continental China that are in conducting in trade with Venezuela through local bitcoins.

And I think there are some Ouija groups where they trade and so on. And this is something that I wanted to like do a little bit more digging about. This is something that I know that is, you know, a subset of the traders are Chinese and a subset of the traders are, you know, just regular Venezuelans, well, you know, from all over the world. Again, we were kind of a nation of immigrants in South America when, you know, times were good. my grandparents are from Spain. There are people from Italy, from Lebanon, from China, from all kinds of places. So they're a very diverse society.

So there must be a whole host of people there in local Bitcoins and everywhere. They're transacting. But yeah, I think, you know, speaking about the way that they organize, I think there are communities. There are sub-communities of these groups. And some of them trade offline. Like they didn't want to pay the 1% that local Bitcoin charges. So once they establish a reputation, they want to establishes, they're established trust they they just move move it to a telegram group or WhatsApp group or whatever and you know it's

very hard to investigate what's really going on here and like traders don't like to talk a lot because like what they're doing is kind of a gray legal area which right in Venezuela it's not illegal to do this but you know they they want to protect their business and it's understandable but yeah I think that to answer your question I don't think it's actually retail users that are buying and selling Bitcoin in Venezuela you know just using local bitcoins person say It's just people who are more accustomed to handling Bitcoin and are more professional about it that are using it, and they're using it to provide services to other people, like people who want to send remittances or people who want to, let's say maybe businessmen who want to take their money out, and they just don't care how it gets done, and they just use local Bitcoin as providers because they take, they'll happily take their bolivores and they'll put them in a bank account in Panama, and they use Bitcoin for as a conduit. So I think that's what's going on. It's more professional phenomenon than that personal one. That's fascinating and that's also what I suspected because, you know, I think the local Bitcoin's interface isn't too difficult, but, you know, Bitcoin itself is still a fairly

complex technology and sort of intimidating so on. So I was a little skeptical that we just had, you know, lots and lots of retail users using it. So it seems like it's more sophisticated entities. Yeah. Are there other platforms that have usage? Because local Bitcoins is not the only P-to-P exchange Fiat on-ramp platform. I think you have Paxful, you have Hoddle-Hoddle. Are there any other exchange technologies that have uptake there?

I know that Huddle-Huddle had an offer to Inneswiland traders that they would waive their fees or they would reduce their fees. I don't know if that's taken off. I haven't seen a lot of, I haven't kept track of the different platforms lately. I know that Paxville has been picking up in other countries.

I'm not so sure that in Venezuela, it's been the case. I think local Bitcoin still remains the place where people meet and the place if you don't have a reputation, if you don't have a group, that you can start as a trader there. But I think, I mean, it's an open question for me whether most of the Bitcoin trade in Venezuela happens through local Bitcoins or outside. Because we see $5 million in volume every week in local bitcoins,

but what is the real volume of Bitcoin transaction Venezuela? I have no way of estimating. I don't know if it's a lot higher than local Bitcoins or it's a lot lower. Or, I mean, it's just like just a little bit more than what local Bitcoin's volumes is. I don't know. On the topic of value, so that is your startup that you work for. Is it a remittance app? Do you use Bitcoin in any way?

Yes. So we are providing a retail service for people who want to move money from money. Colombia to Venezuela. Colombia is the country that has received the most Venezuelan immigrants, you know, in the whole world because we're right next and Colombia has been incredibly kind and generous to Venezuelans. We used to be very welcoming of Colombians as well when Venezuela was booming and Colombia was going through a period of violence, so they are reciprocating and I think it's beautiful. We are sister nations in many ways. So I am really humbled, by the way, Colombia has been behaving towards Venezuelans. And, you know, there's about I think three million

people that are from Venezuela that are here. There's more people coming in every day and many of them are struggling to get by. And I think that, you know, as soon as they get a foot in the economy, as soon as they can get a job and many people in Venezuela are, you know, highly skilled, relatively to maybe some rural Colombians or some Colombians that are here that have had it, you know, relatively good. And now Venezuelans are willing to do more things than for lower pay, which is something that is very common in immigration phenomena. And so we are seeing that people in Venezuelan immigrants in Colombia, as soon as they get their stuff together,

they want to send money to their family, of course, because their families are struggling really hard. And the way to do it traditionally has been to go through a black market. So they try to find a trader that has, you know, some root in the Colombian banking system or, you know, can receive pesos and they have also ways to move money inside Venezuela because again this is all like a Hawala type system because there are no wires coming into Venezuela. Western Union doesn't really work in Venezuela you know well technically does work but it's a very cumbersome and they use

official rate which was really bad for a long time so it's a little bit it's very complex system so people start like for many years people the way to send money has been to go to a money to a money to trader and as you can imagine there's a lot of scams going around there's a lot of people untrustworthy so what we do at value is to send money from columbia to venezuela in a more institutionalized way you know we're a company we're legally you know constituted here in columbia and uh the way we operate is we receive money from columbia from mostly venezuelan immigrants who want to send money back home and this is a very small amounts of money let the average ticket we process is 20 to 20 to 20s.

dollars around that so yeah we receive money there's 20,000 locations where we can receive money from and there this is part of a network called effecti and another network called baloto these are places where you can just physically go like their kiosks and you can go take physical cash with you because the columbian banking system is very close to foreigners and it's it has huge costs so people don't want to open accounts here in Colombia so they they mostly get paid in cash and they have their cash They take their cash to these kiosks and they send it to us through, you know, a ticket that we generate. We have a mobile app. So we generate a ticket for them and the ticket says, you know, how much they should pay.

And like there's no commission that is charged there. Everything is charged in the exchange rate. So it's a very convenient service. You can go and you take from $20,000, which is about $6, $7, and you can take it to these kiosk and the money shows up in Venezuela. And the way that it works is we, with those pesos, we buy Bitcoin, right? And then we sell it in Venezuela. And that way, we can move money very quickly and very efficiently. And this is something that, you know, could be a good business model.

It is a WICOMinator-backed startup. And, you know, we're excited about what we're doing. And we want to move on to the next phase, which is to help people store more of their value in, you know, in a digital. form. So if people would be able to send money in dollars, for example, or something that is denominated in dollars, then they could both save, if the family is here in Colombia, they could save money here, and they could send money to Venezuela. And then as long as we can keep that liquid, as long as we are a trustworthy company that is responsible about the way that we are handling people's money and that can ensure that there is liquidity. And with Bitcoin, we don't have the

problem because there's plenty of liquidity for the amount that we're moving. moving today. But you know if you if you have a new asset and you have something that kind of has to resemble the user, we have to you know really make sure that we can we can turn this you know digital currency that you know is like the dollar into Boliverse and you know and we have to have the value proposition clear. So it's a very big challenge that we're taking on and we're still deciding you know like lunch dates and then when or or where it's going to be deployed first, like if we're going to limit the number of users.

And there's all these bad numbers that we're working with because we want to be responsible. We want to do the right thing. We want to provide unnaturally very reliable and trust with this service. So it's something that's very exciting. That's really, really cool to hear. And so I guess your main criterion for selecting a bridge currency is liquidity. And in that respect, Bitcoin being quite entrenched and being fairly liquid on both sides. I guess you have a local exchange in Venezuela or in Colombia.

Yeah. So your choice of Bitcoin wasn't just ideological. No, absolutely. It was the best tool for the job in that case. Yeah, I even, I arrived at value, started working with them in August of last year, and they already had their app. They were already working with Bitcoin before I even got involved. And I know that they're not ideological.

And this is one of the things that I like about the T. is that we're very pragmatic and we we're doing things that work and we're putting the user first. We are thinking about the person and the family that needs to send money home. How do we get that money moving safely and quickly and reliably? And how do we become a trustworthy company, both for people who live in Colombia and want to send money, and now more and more so for people that live in Venezuela, I want to transact in another system that is not controlled by whatever authoritarian government might be in. be in Venezuela or elsewhere.

And so the hindrance, because you're dealing with three currencies ultimately, so you have on the Columbia side of the peso, then you have whatever the bridge currency is, and then you have to turn it into Bolivars, I guess. And due to that, you need something that's liquid on both sides. So I guess that is a hindrance for potentially using dollars or a stable coin, for instance, as the intermediate currency because there is no stable coin with that accumulated liquidity. Yeah, yeah. So that's one of the challenges we're taking on.

I think it's possible. I think it's possible to open it up at least, you know, limited at first or, you know, we have to be, of course, we want to grow fast. We're a startup and we want users and all of that. But I think that, you know, providing a reliable service is number one in my book. And especially, you know, if you're going to be a fintech. company that needs to be the case and you have to show people that they can trust you whether when they've been let down by governments by institutions by you know collapse of the economy and so many things so i think we like we really want to do things differently and um yeah it's it's

something it's a big challenge that we have to how do we ensure liquidity but there i think there are ways to do it like if you have bitcoin and bitcoin inverse futures or you know perpetual swaps there are some financial engineering that you can do as long as you have have the right expertise and you know Abra was doing this like they had a synthetic dollar that worked pretty well they just like kind of abandoned it because they moved on to other business models but I was a big fan of the way like the they were doing this and I spoke with Bill a couple times and was inspired by this so I think that there are ways that we can do it tapping into local liquidity

pools and also global liquidity pools because you've been access like we are US company again because we were back by white by combinator so we can access let's say BitMex or Deribet or other exchanges that are globally mature and we can combine, you know, we know that Bitcoin is relatively liquid in Venezuela and Colombia up to a certain point. And so we can move that amount of money. But we, in order for us to move dollars, we also need to ensure that the other thing that we buy that offsets the exposure to Bitcoin is also liquid. But there are places where we can do this.

So it is definitely possible. And it's something that we're working very actively on. And so another project they were involved with is this nonprofit called the Open Money Initiative. Can you tell us a little bit about that? Yeah, so we started Open Money Initiative. It was Jill Carlson, Jamal Montessor, and I, and we worked with James Downer last year to do field research into Venezuela. And we actually were mostly in Colombia talking to Venezuelan people. And most of the things that I've learned that were talked about here, you know, I learned both from being Venezuela and from having that background, but also from deeply studying how people are using money today and speaking with people from different backgrounds, from people from, you know, that have migrated and people who stayed and so on.

And so this is, you know, something that we pitched to the crypto industry last year. and we got some very generous backing by the Zcash Foundation, ECC, the Interstate Foundation, Stellar. We were also supported by Human Rights Foundation. So we had a lot of very good partners, and we conducted this deep study into how people use money in Venezuela, and we want to expand to other close societies, so other close economies. And it's something that is very much in my mind, it's something that I actively am continuing to pursue. It's just that the startup life is really tough. It's hard to maintain both things at the same time.

But it's something that I believe in in the long run. I think there needs to be kind of this voice for conducting proper design research and how do we serve people that live in close societies and close economies and how does the crypto industry actually provide value to the people who needed the most. And I think the people who needed the most are people who living in closed economies like Venezuela, perhaps like Iran, perhaps like Cuba, perhaps like, you know, China potentially could become something like that. They already have capital controls. And China has a massive, massive, you know, world power now. And so this is only going to become more relevant as countries issue their own

CVDCs and, you know, people start experimenting with close money systems. And I think we want to emphasize the importance of keeping things open, of, you know, providing freedom to people. And in that regard, we share a lot of values with the Human Rights Foundation. We stand against authoritarianism, and we stand against economic closure. So I think it's something that we want to influence policy around it. We want to continue doing work, you know, deep work with communities, want to study how people use money in other places, and we want to help start up. So like part of what I'm doing here at value is directly, or maybe all of it,

is directly contributing to the mission of the Open Money Initiative of providing those tools to people to be able to be in control of their money and be able to access open money systems. And on a last note, I think we have to address this. So there are a lot of cryptocurrencies to talk about banking. The unbanked is part of their teleology,

their purpose. And I always find it incredibly contrived to be frank because there's so many mental hurdles. Yeah, for sure it is. There's so many mental hurdles involved with adopting a new cryptocurrency, even Bitcoin's been around for 11 years. It's quite challenging for users to start thinking about value

as a string of information, which they need to keep a secret, and they have to self-custody, and also for it to be denominated in this new unit of account, which is fluctuating all the time. So even Bitcoin has all these enormous challenges crossing that threshold. It seems very unlikely that a smaller or newer upstart cryptocurrency would have a shot. So what do you make of all these, the dashes of the world, the omiscos, the nanos, all of these that, their value proposition is this appeal to, quote unquote, banking the unbanked and facilitating transactions in the developed world. And they often, you know, will make reference to Venezuela. Is this just completely empty rhetoric or is there something, are they actually making progress? Well, I know that many people that are working on these projects have very good intentions, but I mean, good intentions don't make good products or necessarily, you know, or good experiences.

So I think what these companies need to do is to find niches, very small, much smaller niches. And actually, if they're going to focus on Venezuela, okay, let's do it. So take the example of value. Value is actually just focusing on Venezuela at the moment because it's where it makes sense. And we're not ideological about using Bitcoin or this or that or die or whatever, but we're just looking for what works. And I think that's important to keep in mind. If you have vested interest in a e-net cryptocurrency that already exists or that you imagine to be the best it could be, then you're going to make compromises that will not serve your users and will not serve the purpose of banking the unbanked.

So I think starting with the premise of, oh, let's start to start, you know, trying to put. I think it doesn't generally work because you already have something that you want to, you know, force people into rather than starting with what people want, which in our case is people want dollars. So how do we give digital dollars to people? Okay. So we have different ways to do that. And it's, it is a very YC ethos, you know, thing that I think that they got right. There's there's very, you know, the companies that that make it in the world or the, you know, the companies that make it in the world or the, or the organizations that are effective, I think, need to address the real needs of people. And they need to be serious about it. And they just can't be just rhetoric and say, oh, we're going to do this. We're going to do that. We're going to have the best network.

It's going to be 1,000 TPS and, you know, whatever. It has to be much more focused work, much more focused research. And the resources need to be, of course, like developing a protocol is very important. But you can't develop it, you know, in a lab. in a very tight environment, you have to iterate and you have to do a little bit more research on how, like who you're gonna serve. And I think in that regard, for example,

the electric coin company has done good work in this. You know, they've tried to develop go to market strategies and find out where there's more need for privacy or they're more perceived need for privacy because we all need privacy. And so that's, you know, people that I've worked with that I think are fantastic. And I know that there are some very well-intentioned people in the space

that want to do this and want to help people, but I think we have to get close to the people that we want to serve. And if you want to help Venezuela, come to Venezuela, come to Colombia, and try to do things from here, at least for a while, and see what you learn and then start iterating on it. I think that's just the answer. That makes sense. In terms of, so lots of Bitcoiners, lots of listeners,

are very sympathetic to the plight of Venezuela, of course. You know, as a formerly middle-income country, which through disastrous monetary policy, has fallen on hard times, what would you recommend in terms of the best ways for bitcoinsers to support not only your work, but the economic liberalization of Venezuela? Well, I think there's, you know,

Bitcoiners are very diverse. I think, you know, Bitcoin whales, you know, people who have a lot of holdings and they don't know what to do with it, I think investing in companies like this is a good way to do work and to support us. And also give us advice about, you know, if you're very knowledgeable about the protocol, the way it works and the way it can help, you know, teaches about it. And we already know a bit about Bitcoin and we use it for very good reason, which is, you know, liquidity. and we are also fans of Bitcoin in other ways. I was mentioned just in beginning of the podcast that I like the way that the monetary policy has been stable

and the community is very strict about its values. And I value that a lot. I appreciate that. So come to us, talk to us. Let's see if we can work together by co-investing or technical help. There's a lot of we can do with more business. Bitcoin or, you know, let's try to push if Bitcoin is going to be our liquid, you know, the currency

that we depend on for liquidity, then let's formalize strategies around how do we get more Bitcoin liquidity in the country? Because at some point, local Bitcoin is going to run out of liquidity and we're not, we are not near that point yet, but it's something that it's a challenge for the future. So how do we make sure that we still are able to use it? And it's a network that is reliable and we can use it to send money in and out, no matter, no matter why. happens you know in in the political world like if if the government wants to ban this at some point or if they they want to cut of this like how do we work so that we are you know not a pattern not not a part of that not not not

something we're not forced into doing things and I think Bitcoin is good for that Bitcoin is good for freedom and you know that's that's what I would say are there specific nonprofits that you would recommend I know there's a a few that are active in Venezuela, obviously, the Open Money Initiative being one. Yeah, so the Open Money Initiative, we typically what we do is we fundraise for specific projects. At the moment, we are producing, like, lightweight research. And, you know, since I'm more focusing in value and, you know, Jill and Jamal are also doing other things that are related to financial inclusion and all these world, but we want to come together again soon and do more projects. So we

Stay tuned for that, for, you know, subscribe to a medium. We're probably going to have other ways to reach out to the community. So stay tuned on that. I think that if you want to help Venezuelans, you know, like provide humanitarian relief support as something that's very different from the kind of research that we do. I would recommend Bitcoin for Venezuela initiative that's run by Randy Brito. And they have like a way to turn Bitcoin into food, essentially.

And they have a treasury. They maintain the funds there and they are very consistent about posting pictures, you know, protecting the privacy of the people involved. And they received donations from all over the world from Bitcoiners all over the world. And they are good at, you know, charitable work, like regular charitable work. The thing is that they are also good at getting Bitcoin in because I have tried to help other charitable organizations to accept Bitcoin and to use it and to turn it into food. And it's challenging because you typically need a person or two in the organization that get it. And that you know how do you go to put up to put coins to turn it like to go in and out. So I think working with these orgs that are already established that are, you know, in the chart navigator, they don't show up.

And we can't really assess, you know, how much more effective can you be at the moment. But I think we can help them be more effective. So like taking both technical help to them, you know, the people from the regular NGO work. If they want to work with them, that would be, I think, amazing. and regular just donations. If you, what you want to donate is Bitcoin, I think this organization in particular is good. Alejandro, you've been extremely generous with your time and very forthcoming in terms of untangling these quite complex issues.

Where can people follow you and follow your work? Well, so I'm on Twitter. My handle is A-L-E-G-W, and that's mostly where I post. Okay, well, thank you so much. This has been absolutely fascinating. I've always wanted to talk to folks on the ground. You've been very helpful in the past explaining to me how exactly these things works, and what local Bitcoins is being used for.

I think this is going to be extremely educational for our listeners, too. There's so many myths about Venezuela and very little in terms of genuine information from practitioners. So I just want to thank you again. This has been absolutely fascinating. No, thank you, Anik, for your time and for giving me a platform. And again, I would recommend you stay tuned with the Open Money Initiative. We have more stuff coming. And, you know, especially, you know, Peter McCormack has just been in Venezuela.

I think dispelling these myths is important. There are some really good people in the space that are trying to do this. I know I can think of Lee Quinn, for example. She always posts about Iran and about, you know, sex workers. And, you know, the different demographics. that use cryptocurrency for one reason or another, there are a lot of myths around them, and we should try to understand them better. And I think following good journalism in the space and good research in the space, be

the Open Money Initiative or elsewhere, I think is a really, really good way to move forward. Totally. Well, I can't say I'm a journalist per se, but I'm happy to give light to these narratives and these voices. So thanks again, man. I really, really appreciate it. This has been a great conversation.