Venezuelans Crave USDT as Dollar Exchange Rate Explodes
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Loading... - Julia Gibson
- 06 Nov 2024
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In Venezuela, the use of Tether’s USDT has surged as it emerges as one of the largest sources of dollar liquidity in national markets. Despite government efforts to stabilize the economy by injecting dollars into the banking sector, these measures have had limited success. As a result, many Venezuelans are increasingly turning to Tether as an alternative to physical dollars.
The adoption of stablecoins, particularly Tether, has become a significant trend in the dollar exchange markets across Latin America. With a market cap nearing $120 billion, Tether is being utilized by Venezuelans to navigate the widening gap between the government’s official dollar exchange rate and the black market price. In recent weeks, this disparity has exceeded 20%, leading to disruptions in the economy and prompting a shift in how people save and transact. While Tether is being embraced as a savings tool, the use of physical dollars as a medium of exchange has diminished. In retail settings, businesses typically accept dollars only at the official exchange rate, which can result in losses for consumers.
In an attempt to manage the situation, the Venezuelan government injected over $190 million in August to provide liquidity and stabilize the exchange rate, contributing to a total of more than $4 billion by mid-October. However, these efforts have only managed to slow the rise of the exchange rate rather than reverse it. This ongoing struggle has placed a significant financial burden on the government, which must allocate a substantial portion of its income to artificially maintain low exchange rates in a bid to stabilize the national economy.
Tether has played a crucial role in the Venezuelan exchange landscape, particularly due to the scarcity of physical dollars. Local cryptocurrency market analyst Kevin Hernandez estimates that approximately 76% of crypto transactions in Venezuela involve USDT. He noted that peer-to-peer markets handle nearly $28 million in USDT each month, underscoring the stablecoin's importance in the Venezuelan economy. Additionally, many remote workers in Venezuela receive their salaries in USDT, further solidifying its relevance.
This trend aligns with findings from the latest Chainalysis Latam Report, which indicates that Venezuelans are increasingly drawn to stablecoins as a means to combat the devaluation of their fiat currency. The ongoing quest to preserve purchasing power has led to a significant uptick in crypto market activity within the country, with growth exceeding 100% from July 2023 to June 2024. As the economic situation continues to evolve, Tether's role in the Venezuelan financial landscape appears set to grow even further.
