Venezuela: When Money Breaks
This is a story about what people do when their money stops working. From guest colunnist Sophia Nasibdar, Sophomore, National Cathedral School (NCS), Washington, D.C.
What do you do when everything you’ve saved in your life is wiped out by sanctions and hyperinflation? How would you react if your country’s collapsing economy and currency put everything you have at risk? Look no further than Venezuela – where people not only lost their wealth to inflation and a faltering economy crippled by sanctions, state corruption, and socialist policies, but also lost hope and trust in the institutions that were supposed to protect and care for them.
While the world has been picking over the geopolitics of President Trump’s military operation in Caracas, an interesting financial narrative is emerging about how ordinary Venezuelan families and even the Venezuelan state save their own money.
For context, Venezuela has been under US Sanctions since 2006, which were ramped up in 2015 and again in 2019. The Venezuelan Bolivar has been one of the world’s worst-performing currencies and has undergone major devaluation over the last decade. The sanctions and mismanagement of the Venezuelan economy were so bad that in May 2019, according to Le Monde, “The Venezuelan government acknowledged the disastrous state of the country’s economy… the Central Bank of Venezuela (BCV) finally announced that inflation had reached 274.4% in 2016, 862.6% in 2017, and 130,060.2% in 2018.”
Fundamentally, Venezuela as a country had lost control over its currency and economy, but most importantly, the people of Venezuela have experienced a complete wipeout of their savings. The Atlantic Council in Jan of 2025 reported that “Between 2013 and 2021, Venezuela’s economy contracted by more than 75 percent (as measured by GDP)” – put simply, the Venezuelan economy has eroded three-quarters of its wealth in less than a decade.
Welcome to the world of Bitcoin
Bitcoin was born on Jan 3rd, 2009, introduced in a 2008 now-famous cryptographic paper by Satoshi Nakamoto, following the Great Financial Crisis of 2008. Bitcoin’s big idea was to create a peer-to-peer electronic cash system without third-party intermediaries. The core tenet was to establish peer-to-peer trust without a central authority. Could Bitcoin solve the problem Venezuelans were facing: a deficit of trust and hope?
Hardworking Venezuelan families knew their money was worthless, so they started saving and converting their Bolivars into Bitcoins in the last decade. A person would get paid wages but would immediately convert them into bitcoin to hedge against the Bolivar’s declining value. The proposition that Bitcoin could protect “value” was so appealing that even the State of Venezuela attempted to use Bitcoin and may have bought significant amounts of it. In 2019, Bitcoin Magazine reported, “in a bid to circumvent U.S. sanctions, the government of Venezuela has begun its first experiments with a program to convert tax revenue into bitcoin and trade it for fiat currency at foreign exchanges.”
When money is broken and value and trust are lost, people seek alternatives and diversify from their currencies. Families tend to preserve value by moving to assets outside the domestic currency system, such as US dollars and gold, and to Bitcoin. This move aims to preserve purchasing power. Turkey, Argentina, and Nigeria, which experienced high inflation and currency depreciation, also saw increased Bitcoin usage. People from all these countries shared a common goal: reduce dependence on a failing currency and preserve savings in something they trusted more.
From Bitcoin- Store of Value to Real Life: Venezuela’s Next Monetary Chapter
Looking ahead, the “Bitcoin for savings” story is only half the story. Venezuelans still have to pay bills, import goods, and convert value into usable cash as the Bolívar loses value and people lose access to banking channels. To keep the economy functioning, the Venezuelan government has turned to stablecoins. In September 2025, Reuters reported that authorities began authorizing the use of USDT (Tether) to facilitate vital imports, such as food, and to bypass US dollar shortages. By routing these transactions through approved banks and digital wallets, the state aims to sustain domestic production and international payments despite the US tightening sanctions.
This USDT workaround is not risk-free either. When a country’s money system is under pressure, it can become easier for sophisticated crypto scams and money laundering to spread fast. In the last three years, Reuters has reported that experts and politicians called for tighter scrutiny of Venezuela’s crypto use as its state oil company, Petróleos de Venezuela, S.A. (PDVSA), increased crypto-related transactions after U.S. oil sanctions returned. Reuters also reported that PDVSA had previously faced a corruption scandal involving billions in missing or unaccounted-for receivables; part of the concern was linked to earlier crypto-related transactions, showing how weak compliance can lead to huge losses. And even if USDT feels like a “digital dollar,” it’s not outside U.S. enforcement: Reuters quoted Tether as saying it follows the U.S. Treasury sanctions list, and later reported tools aimed at spotting activity tied to sanctioned groups.
So, the real future question is bigger than Bitcoin and Crypto: Can Venezuela rebuild trust in the Bolivar, or does the country keep drifting toward dollarization (formal or informal)?
To rebuild trust in the Bolivar, the Venezuelan central bank will need to convince people that inflation won’t spiral again. Central bank best practices emphasize that central bank independence, accountability, and clear communication are key to keeping inflation expectations anchored and steady, one of the basic conditions for people to feel safe saving and transacting in the national currency.
Americas Quarterly notes that policy shifts in Venezuela since 2019 encouraged dollarization, but also argues dollarization alone cannot fix deeper governance problems. In 2022, the Turkish Economic Review published a detailed research paper which found strong support for dollarization or a currency board, and low trust in the central bank. The survey found “A majority of Venezuelans do not trust the Central Bank of Venezuela, and believe that immediate change is necessary. A majority of Venezuelans also indicate that the implementation of dollarization or an orthodox currency board are not only the most desirable solution in theory, but are also highly supported by Venezuelan public opinion.”
Venezuela’s story isn’t really about Bitcoin or Crypto, it’s about trust. If the Bolivar cannot earn it back, people will keep adapting, because as one Venezuelan businessperson put it, “when one operation closes, others open.”
References and Citations
· https://www.imf.org/en/news/articles/2024/06/17/sp061424-central-bank-independence
· https://www.americasquarterly.org/article/dollarization-cant-save-the-venezuelan-economy/
https://econpapers.repec.org/article/cvvjourn2/v_3a9_3ay_3a2022_3ai_3a4_3ap_3a298-308.htm