What's Holding Back Bitcoin in Venezuela? This Group Is Investigating

Open Money Initiative co-founder and Venezuelan expat Alejandro Machado wants to help his homeland while remaining realistic about bitcoin.

Now his San Francisco-based nonprofit OMI is teaming up with crypto industry incumbents, like the peer-to-peer exchange LocalBitcoins, to explore ideas for making cryptocurrency more useful for people in distressed economic climates like Venezuela.

Better-off Venezeulans have mainly used bitcoin for remittances, freelance earnings from abroad and savings.

Another Venezuelan, who now crosses the Colombian border regularly to find work, smuggles back American dollars in her underwear and hair.

OMI's research found such users have habits and circumstances that current bitcoin wallets don't account for.

"You could find merchants willing to accept bitcoin for more high-end goods, but not for more basic or staple goods. You can't go buy bread with bitcoin in Caracas."

Mobile wallets are one of the underlying challenges for bitcoin users in Venezuela because it is common for Venezuelans to pool their money and even share one bitcoin wallet with family or friends.

This supports what Human Rights Foundation chief strategy officer Alex Gladstein told CoinDesk about research he is conducting with bitcoin users in Iran, India, and Nigeria.

"Both with remittances and commerce, people are using bitcoin as a bridge between two different monies," Gladstein said of users that leverage bitcoin to access fiat when they need it.

"It looks like in this case, with bitcoin in particular, the LocalBitcoins platform became a vital way for Venezuelans to access the global economy," Gladstein said.