USDT: The Emerging Payment Method for Venezuelan Companies
It is reported that according to the data of Chainalisis, although Venezuela and other countries use stable currencies linked to the US dollar (such as USDT) m…
It is reported that according to the data of Chainalisis, although Venezuela and other countries use stable currencies linked to the US dollar (such as USDT) mainly related to inflation and depreciation, a second use case has recently been found. A few companies are using USDT as a payment method for foreign customers and suppliers. Because of the risk of sanctions, they are afraid to use traditional payment methods.
Venezuela is using USDT to curb inflation and evade sanctions
Interpretation of the news:
The use of cryptocurrencies for traditional payment methods is gradually increasing in Venezuela, where inflation and depreciation crisis confronts businesses daily. Due to the country’s continuous exposure to US sanctions, some Venezuelan companies are shifting their payment method to USDT, a stable currency linked to the US dollar. According to a report by Chainalysis – a blockchain analysis firm, the demand for stable currency is growing beyond an inflation hedge. Companies are gradually gravitating towards the currency as a viable payment method for suppliers and foreign customers.
USDT offers stability in the Venezuelan market, where the national currency devalues drastically against the US dollar. It allows businesses to carry out transactions without worrying about losses due to rapid currency depreciation. As a result, many companies have adopted USDT, which offers liquidity, stability and ease of use over traditional payment methods.
However, the primary reason behind the increased usage of USDT is the risk of sanctions that Venezuelan companies face frequently. The US government had imposed multiple sanctions on the country’s oil, mining, and finance industries over the years to induce political change in the country. This has led to limited banking capabilities as sanctioned companies face significant hurdles in processing foreign transactions through traditional banking channels.
In this scenario, USDT offers a viable alternative to traditional payment methods, as it reduces the need for traditional banks, minimizing the risk of sanctions. However, its adoption is still in the initial stages, and many businesses are still undecided about its application, citing its volatility concerning fluctuation in value.
USDT, despite its growing popularity, is still a stable currency issued by a private company, which carries a small, inherent risk of trust. Stablecoin technology is still in the development stage, and regulations surrounding cryptocurrencies remain unclear, raising concerns among companies regarding its viability as a mainstream payment method.
To conclude, the adoption of USDT as a payment method for foreign transactions is slowly gaining traction in Venezuela. The currency, although in its early phases, offers stability and a partial solution to trading limitations imposed by sanctions. Its adoption as a payment method will require regulatory stability, an increase in user acceptance and a mature stablecoin infrastructure to allow mainstream acceptance.
References:
https://www.coindesk.com/why-some-venezuelan-companies-prefer-to-pay-suppliers-in-crypto
https://www.ft.com/content/145309b7-3cea-4d6d-b05a-0740832567f1
https://www.bloomberg.com/news/articles/2019-01-31/bitcoin-buzz-fading-venezuelans-turn-to-dollars-and-e-wallets
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