In the year since the COVID-19 pandemic first disrupted almost every aspect of our lives, many things have happened within the crypto ecosystem around the world. So, what has the past year been like for crypto in Venezuela?
Even before 2020, Venezuela already had a number of businesses that accepted various cryptocurrencies as payment; however, considerably more have moved to adopt this form of payment over the past year. This includes everything from the hotel sector to famous pizza chain Pizza Hut announcing that it will accept Bitcoin (BTC), Litecoin (LTC), Dash and other cryptocurrencies as a form of payment.
Halfway through 2020, crypto exchange Cryptobuyer and payments processor Mega Soft announced that they would form an alliance to allow some 20,000 merchants that use their services to accept payments in crypto through the Cryptobuyer Pay solution developed by the exchange.
Another important landmark was in September 2020 when a Bitcoin node was connected to Blockstream’s satellite network — a first for Venezuela. The result of a joint effort between Cryptobuyer and crypto education provider AnibalCripto, the node was launched despite the logistical limitations imposed by COVID-19-related lockdown measures. Likewise, those responsible for the node announced that this was the first step toward building a mesh network that would be able to process Bitcoin transactions without the need for an internet connection.
Despite the ongoing economic crisis in Venezuela, the crypto mining industry has been growing. According to the Cambridge Bitcoin Electricity Consumption Index, Venezuela contributes the most to the Bitcoin hash rate out of any nation in Latin America, which means that there is a substantial amount of computing power being generated in the country.
However, Venezuela introduced a new piece of legislation in September 2020 targeted at the country’s mining industry. In addition to the creation of an obligatory registry and the establishment of new taxes for those who work in mining-related sectors, the new law introduced the controversial “Pool de Minería Digital Nacional” (National Digital Mining Pool). Under this new requirement, it will be obligatory for miners to contribute their hashing power to a new, state-backed mining pool.
Overall, there is still no real clarity regarding the mining pool, which means that the way in which the law will be enforced is not really known, and it has not yet been revealed exactly how Venezuelan miners will have to participate.
Although it may seem paradoxical to see such a level of support for cryptocurrencies from a government that is often seen as being quite restrictive of its citizens and their freedoms, the past year has seen several crypto experiments, including plans to allow Venezuelans to pay for passports with Bitcoin using payments processor BTCPayServer.
However, even though the administration of President Nicolás Maduro did not end up implementing the passport plan, its vision for the use of crypto did not diminish. For example, Maduro proposed an anti-sanctions bill in September 2020, seeking to use cryptocurrencies to evade the various sanctions imposed on the country and hoping to boost crypto use in various business operations.
More specifically, there were reports that Maduro’s administration was using Bitcoin to facilitate trade between Iran and Turkey, two of the current main geopolitical allies of the state.
It was also reported in November 2020 that the Venezuelan Army decided to open the Centro de Producción de Activos Digitales del Ejército Bolivariano de Venezuela (Digital Assets Production Center of the Venezuelan Army), a center that houses ASIC mining equipment designed for proof-of-work cryptocurrencies in order to generate “unblockable” financial income, according to the military leaders who inaugurated the facility.
All this progress made on the part of the Venezuelan state in the crypto ecosystem has been to seek solutions to get around the sanctions that the United States has imposed on Maduro, his cabinet and high-ranking military officials.
However, U.S. authorities have declared that they are monitoring Venezuela’s cryptocurrency operations, and in June 2020, they even added its cryptocurrency superintendent — the highest authority on the regulation of the crypto ecosystem in Venezuela — to the U.S. Immigration and Customs Enforcement’s Most Wanted List.
Record number of bolivars locked up in Bitcoin
The bullish surge of Bitcoin’s price has been coupled with the rapid devaluation of Venezuela’s fiat currency, which has resulted in a record number of bolivars being traded in for Bitcoin. In the first week of December 2020 alone, peer-to-peer exchange LocalBitcoins saw 5.85 billion bolivars exchanged on the platform. By the first week of February, this number had jumped to 8.56 billion bolivars.
The complicated political and economic situation in Venezuela has led the government to consider alternative solutions. In the midst of this scenario, blockchain technology and cryptocurrencies, in particular, have been brought to the fore.
Maduro is not the only one who sees cryptocurrency as a way out of troubled waters. One of his main opponents, Juan Guaidó — who is president of the National Assembly and recognized as Venezuela’s legitimate president by some 60 countries — has used the stablecoin USD Coin (USDC) to evade financial restrictions imposed by the Maduro administration in order to send humanitarian aid to Venezuelans.
The funds used by Guaidó came from assets that were seized by U.S. authorities from the U.S.-based bank accounts of Venezuelan state companies and various members of Maduro’s administration.
Opinions within the ecosystem
To understand better what it felt like on the ground within the crypto ecosystem in Venezuela, Cointelegraph en Español spoke with some of the main actors who were involved in the various events that set the tone during the past year.
Jorge Farias, CEO of Cryptobuyer, opined to Cointelegraph en Español that the use and adoption of crypto as a form of payment in Venezuela is becoming a reality: “The global and local situation has made it so that thanks to the pandemic, businesses and individuals are looking for payment alternatives that do not require the interaction or physical presence of people.”
Ernesto Contreras, head of business development at Dash Core Group, mentioned that Dash’s plans to expand to national chains was halted due to the spread of the pandemic. Additionally, during the lockdown period, “We saw how delivery offers grew, which work in a 100% digital environment, and several services like Dingo, Piido and others have joined in accepting Dash and cryptos.” He added further:
“Despite the immense difficulties that the Coronavirus has brought, the crypto ecosystem continued to reach great milestones in Venezuela during 2020, and this added to a global environment that is increasingly digital, and with a positive trend for cryptocurrencies in the world, has opened more doors of great importance for the growth, adoption and use of Dash and cryptos.”
Javier Bastardo, host of the Satoshi en Venezuela podcast, told Cointelegraph en Español that “Venezuela continues to be one of the most active p2p exchange markets.” However, he believes that the trend has not reached its peak just yet. Moreover, he believes that FOMO — the fear of missing out — is not influencing the situation as much as in 2017 and that a steady inflow of people who heard about cryptocurrencies in the past are only now opting to enter the market. He also added that another factor that has dominated the past year has been the willingness to start paying directly in crypto, which ultimately delivers a sustained level of adoption.
Anibal Garrido, CEO AnibalCripto, told Cointelegraph en Español that “Venezuela has been part of important contributions to the development of the ecosystem.” He further added that:
“The difficult situation of COVID-19 has left us with a great learning experience: NOT to depend on physical presence for the harmonious development of our society.”
He added that the local mining law sets a precedent for other countries to evaluate and consider. He also mentioned the incorporation of crypto payments in retail chains along with the developments in providing fast, secure fiat-to-crypto exchange processes.
Mariangel Garcia, community manager for Binance Spanish, believes that “Venezuelans were shaken out of our comfort zone, businesses were forced to start a digital transformation and now many users can see how options abound that before this situation did not exist.”
She further told Cointelegraph en Español that this translated into the widespread adoption of Binance’s native cryptocurrencies in the country, as well as a surge in demand for its peer-to-peer platform. For Garcia, this means that “Thousands of Venezuelans have found financial freedom in our products without limitations.”
She concluded by saying that: “Venezuela is the only country in Latin America with an inclusive vision towards the adoption of cryptos, which is a good start.”
Jorge Farias, CEO of Cryptobuyer, sadly passed away shortly after the interview.
Pele NFTs to Drop on Ethernity Chain from May 2
NFTs is about capturing value of precious moments compliantly. Ethernity Chain does this brilliantly, this time by dropping a new collection of NFTs honoring the legacy of the iconic Brazilian soccer player, a world cup winner, and a legend in soccer halls, Pele.
Pele is coming to Ethernity Chain
An announcement from Ethernity Chain—a differentiated platform introducing authenticated NFTs, on Apr 16, said Pele’s collections would be available in two weeks from May 2.
These valuable collections are created by Kingsletter and Visual Lab–leading Australian Concept artists. It is the first time the legend’s trading cards have been released digitally.
The second batch will be Pele NFTs will be released later this year.
It is easy to see why the physical vintage cards of Pele are worth millions and considered the most valuable in the world.
Pele’s Golden Records make his NFTs Valuable
Pele is award-winning and honored severally in the last 60 years or so.
Together with Diego Maradona, they are joint winners of the FIFA’s Player of the Century award.
He was also instrumental in three World Cup-winning teams of 1958, 1962, and 1970.
Besides, he was unplayable during his playing years. Thus far, he remains the highest goal scorer in Brazilian national team history, scoring 77 goals in just 92 appearances.
Before retiring in 1977, Pele scored 500 goals for Santos—a professional football club in Brazil.
For this, Pele is adored and endeared by football fans and bodies globally for his contribution to Soccer and tireless efforts in eradicating poverty. Through the Pele Foundation, the mega football star is empowering Children battling poverty.
For this reason, 90 percent of Ethernity Chain’s sales will directly benefit the charity.
Jason Heuser’s NFT Collections Sold out for Big Dollars
This collection will be the second following Ethernity Chain’s partnership with Jason Heuser, which saw the drop of the “Welcome to the Internet” collection.
It was an immense success since the “Legendary Edition NFT” eventually sold for $162k from 22 bids. The NFT hard a reserve price of $35k.
Other NFTs—the “Limited Super Edition” sold for $173,824 while the “2012 Original” was scooped for a whopping $224,800.
Mergers and acquisitions are rising, leaving crypto assessments in question
Fintech, cryptocurrency and mergers and acquisitions are poised to intersect significantly in the coming year. M&A activity is expected to rebound quickly — more than 60% of decision-makers at large companies who were surveyed by FTI Consulting for a February report agree that their company has recently been a target of aggressive M&A, and 39% say their companies are looking at M&A as a result of the COVID-19 pandemic. At the same time, the cryptocurrency market is making strides toward mainstream acceptance.
As a result, there’s likely to be an uplift in deals involving cryptocurrency assets and valuations throughout 2021. While this trend is likely to spur some exciting developments in the financial sector, it is also starting to raise unprecedented questions about whether cryptocurrency and these complex business models can be accurately assessed and verified in the context of dealmaking.
Digitizing the world of finances
The effects of the COVID-19 pandemic have driven significant shifts from physical to digital services across a wide range of industries — none more dramatically than in the financial services industry, in which S&P Global has reported that an estimated 420 billion transactions, worth $7 trillion, will switch to cards and digital payments by 2023, reaching $48 trillion by 2030.
PayPal further legitimized cryptocurrency when it began accepting it in November 2020 and announced its acquisition of Israeli crypto startup Curv in March. Visa has also been active in the fintech arena, most recently with its $5.3 billion acquisition of Plaid in January. Investors are also keeping a close eye on the developments that will follow Coinbase’s recent debut on the Nasdaq stock exchange. Naturally, all of this activity is generating a lot of interest in fintech and cryptocurrency companies among traditional financial services institutions and big tech corporations. Even amid market lows during the first half of 2020, cryptocurrency-related M&A hit $600 million, more than the total for all of 2019. All signs point to an even larger year in 2021.
The need for due diligence
Of course with M&A, IPOs and capital raises also comes the need to conduct due diligence, market assessments and valuations. But when cryptocurrency is involved as the primary asset or a key asset, there are additional, complex layers to standard due diligence processes.
Buyers and target companies need to consider conducting a technical assessment of the digital assets at play. Potential buyers will want to know how to verify the cryptocurrency assets and ensure that the target company’s reported assets are accurate. Because cryptocurrency companies often operate under unconventional business models, and due to the very nature of distributed ledger systems, it’s not always clear what’s what. The crux of the issue is to find out about any problems, risks or inaccuracies in a target company’s cryptocurrency assets, framework and business model and whether they have the correct procedures in place to support their crypto-based business activities.
Likewise, cryptocurrency companies that are looking to raise money or sell their business to a larger technology or financial services corporation (or file for an IPO) can help position their business by conducting in-depth assessments that will demonstrate their differentiators and value to potential buyers, and support subsequent valuation and due diligence activities.
The nuances of the crypto space
Many may not understand the importance of conducting a technical assessment and cryptocurrency evaluation as part of their larger financial due diligence, or that it’s even possible. However, experts in this space are beginning to develop complex methodologies to conduct, fast, in-depth and cost-effective technical assessments of cryptocurrency assets and leverage digital forensic investigation techniques to sample and verify digital wallet ownership, digital asset ownership, as well as verify assets under custody, and the value and validity of assets.
Additional areas that buyers should examine in a crypto-focused technical assessment include:
- The full scope of digital asset holdings, including hot wallet services, cold wallet storage, business wallet services, portfolio management and other services.
- Size, locations, duties and other key details relating to technical and sales support, and development teams.
- Risks within cryptocurrency-related contracts, privacy, security, Know Your Customer, Anti-Money Laundering, signatures and other policy controls.
- Code audits across wallets, user interface and application programming interfaces.
- Governance implications (such as regulatory requirements and standards including the United States government’s Cybersecurity Maturity Model Certification and the European Union’s General Data Protection Regulation).
- Technical structure and stability.
- Third-party partnerships, data use and obligations.
- Research and development projects and developmental coin/token support.
In addition to traditional financial due diligence and valuations that accompany fundraising and M&A transactions, buyers in this space will also need to validate and assess the technical elements of the target company’s cryptocurrency assets and structures. Doing this right will require the support of a domain expert in blockchain and cryptocurrency who understands the technical complexities and knows what questions to ask. Cryptocurrency remains an enigma to many people, but a thorough, expert-driven technical audit can reveal risks and eliminate guesswork to support the execution of high-value, disruptive deals.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Steven S. McNew is a senior managing director within the technology practice of FTI Consulting. In his role, Steven helps clients evaluate and implement blockchain solutions and builds cost-effective, defensible strategies to manage data for complex legal and regulatory matters. Steven is an expert in blockchain, information and data security, complex discovery and digital forensics. He completed studies in blockchain and cryptocurrency at MIT and has led engagements involving blockchain assessments, pilot projects and software selection and implementation. He has also led disputes involving issues related to blockchain and various forms of cryptocurrency.
AgeUSD to Launch as First Stablecoin on Cardano Network
Multinational blockchain technology company Emurgo initially announced the AgeUSD stablecoin in January 2021. The firm has since announced a partnership between the Ergo Foundation, Emurgo, and Charles Hoskinson’s Input-Output Global, the parent company of IOHK.
The AgeUSD stablecoin will be available on Cardano as soon as smart contract capabilities are launched on the blockchain, it revealed.
Do We Need Another Stablecoin?
Emurgo is aiming to prevent events like MakerDAO’s Black Thursday which emerged through vulnerabilities in its Dai collateralization mechanism. A mass liquidation of the vast majority of Maker vaults resulted in around $4 million in Dai being under-collateralized at the time in March 2020.
AgeUSD’s so-called “Staticoin” protocol-inspired design does not rely on collateralized debt positions (CDPs).
“Thanks to its design, the scenario that happened on Black Thursday is not possible for the AgeUSD protocol. Without CDPs, we do not have liquidation events nor the requirement for users to perform transactions to ensure that the liquidations actually work properly,”
The stablecoin runs on the Ergo blockchain aiming to automate as much as possible within the mathematics of the protocol itself. Reserve providers pay Ergo’s native currency (ERG) to mint reserve coins which represent the underlying collateral. Users of the stablecoin can also deposit ERG into the reserves in order to mint AgeUSD, it explained. This is only allowed by the protocol if there are enough reserves above its reserve ratio. Banks use a similar method to loan out funds.
The Cardano partnership will also enable its native token, ADA, to be used as collateral to mint reserves. However, the potential downside is that the stablecoin is only backed by these two assets whereas Dai is backed by multiple cryptocurrencies.
AgeUSD will launch on Cardano when it rolls out the Alonzo update that ushers in Plutus powered smart contracts. This is expected in the latter half of this year according to the roadmap.
Cardano ADA Price Update
As the long-awaited update nears, ADA prices have been cranking to new highs, the most recent ATH being $1.55 on April 14. At the time of writing, ADA was trading up 2% on the day at $1.45 according to Coingecko.
It is the sixth largest cryptocurrency by market cap which currently stands at $46 billion and there are 32 billion tokens in circulation. The token was briefly flipped by Dogecoin but has regained its position in the charts, just below Tether.
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