Use of digital assets in Venezuela, Palestine, and natively

While some can go fully digitally native, most still rely on shaky bridges between the digital and legacy systems

Good morning,

Since last week, I’ve missed a few days of posts. There’s a good reason for that. I had a major (positive) change in my life that impacted my schedule—can’t talk about this yet… but soon. Going forward I still plan to post dailyish.

I am however sunsetting members-only posts. Everything new will be available to everybody. But comments will still be members-only and I’ll continue to prioritize responding to questions and comments from members. I hope this feels like more for everybody and not less for some. Open to feedback.

As always, thanks for your support.

Tony


While the killer app for digital assets is speculation today, there are also real people using them for their everyday personal and business needs.

Here are three pieces documenting three different uses:

  1. Open Money Initiative’s findings from their field work in Venezuela and Columbia

  2. A story on civilian usage of BTC in Palestine

  3. An interview with a team that manages their ICO treasury

The first two stories are more similar than different. Given some extenuating circumstances like capital controls or a hyperinflationary currency (or both), how do you continue to earn wages and buy necessary goods and services?

In Venezuela:

Óscar, a 50-year-old car bulletproofing business owner, told us: “generally, I get paid in US dollars. Of course I prefer the dollar. But when I do smaller jobs I charge my customers in bolivars. I still have to pay my rent and some employees in bolivars, so I use them to cover those costs.”

In Palestine:

Most Palestinian bitcoin users are accepting bitcoin payments for freelance work, or remittances from family abroad, and cashing it out through local peer-to-peer groups. The UAE-based nonprofit operator said that, in an attempt to curtail terror financing, Israeli and American authorities sometimes interfere with bank transfers.

In both cases, transacting in a foreign currency be it dollars or bitcoins is risky. Either using BTC itself is illegal or the money exchanging an end-user relies on is illegal. So you’re either facing direct punishment from law enforcement or risk of loss through your money exchanger.

And because many essential expenses are denominated in the local currency, you cannot make a wholesale switch to your currency of choice—you still need to switch back and forth between the foreign currency and the local currency.

For the ICO team, the story is different. They were able to build and operate a business without a traditional bank. (I’m not sure whether they use one, but conceptually they would not need to and that’s the point). They formed capital with an Ethereum wallet, managed their funds with financial products native to Ethereum (MakerDAO and Compound Finance loans), and could pay their employees in Ethereum assets.

So for at least a small slice of people that are digital asset native, there’s an increasingly complete alternative financial system available.

But for the vast majority of people facing everyday challenges inextricably linked to the traditional financial system, digitally native money can play a small role but is far from a panacea. This passage from OMI really resonated:

Bitcoin has made digitally native money available to everyone with a computer connected to the internet. Or has it? For people to want to use these new forms of money, they must be highly usable and interoperate easily with systems that they already recognize as money.

I’m interested in learning more and maybe supporting efforts to better bridge the traditional and digitally native forms of money for the people that need it most. If you or someone you know is working on this, please let me know.