Could Bitcoin save Venezuela from financial meltdown?

The financial situation in Venezuela is reaching new chaotic heights. The problem of rampaging inflation is largely the result of the mismanagement of its funds by the banks, and also the government’s apparent inability to do anything about the situation. So could Bitcoin and other cryptocurrencies be used to solve the embattled country’s financial problems?

Venezuela’s worsening financial crisis

Venezuela’s fiat currency continues to become worth less and less as every day goes by. The country’s rate of inflation is also alarming, as its annual rate has recently topped a dizzying 756%. It seems that no matter how you look at things, fiat currency is on its way out.

Thus far, the banks’ only suggested course of action is to consider dropping more helicopter money into the economy. However, although this recourse will temporarily enable the country’s citizens to get by for a limited period, it will only serve to fuel inflation even more.

Drawing more money into circulation may place a sticking plaster over the bleeding wound, but it will ultimately only create more issues, as the value of the country’s currency continues to tank.

Bitcoin as a solution

So, could Bitcoin provide a potential solution to Venezuela’s financial crisis? Venezuela has a number of local Bitcoin exchanges, which have dealt with banking issues in the past.

The currency is tamper-free and it is not open to issues of cybercrime or fraud, unlike traditional banks. Bitcoin has been outperforming the local currency by an impressive margin and those living in Venezuela will certainly be looking for some form of financial relief in the near future.

However, the local government is not keen on Bitcoin users. A number of people have been arrested for their involvement in cryptocurrency mining. This is because the country’s electricity is sponsored by the Venezuelan government, creating a rather difficult mining situation.

As worldwide interest in Bitcoin and other cryptocurrencies increases, and more and more people are looking to digital currency as a financial rescue option, it seems that countries under financial pressure may end up turning to the currency of the future as a solution to the financial woes of the present.