As U.S. military actions continue in Venezuela, many locals are looking to secure their savings by converting their bolívares into the dollar-pegged digital token USDT (Tether). This trend reflects a broader shift in volatile regions, including parts of Latin America and the Middle East, where ordinary individuals are increasingly turning to stablecoins to protect their wealth from oppressive governance and rampant inflation.
Digital asset lender Ledn co-founder Mauricio Di Bartolomeo explained that stablecoins have emerged as a necessity for many people facing restrictions on accessing U.S. dollars. Since its inception in 2014, USDT has gained popularity in countries like Russia and Iran during times of political unrest. Individuals utilize USDT not only to send and receive remittances but also to safeguard their funds from local currency devaluation.
However, USDT is not without its challenges. Although designed to maintain a value equivalent to $1, fluctuations in demand can lead to price volatility. Recently, demand surged in response to U.S. actions in Venezuela, causing USDT’s price on peer-to-peer exchanges to spike to around $1.40. This volatility highlights the liquidity issues within the cryptocurrency market and raises concerns about its role as an emergency financial tool.
While converting fiat money to stablecoins can facilitate capital flight, it also poses risks such as local currency depreciation. Zero Knowledge Consulting CEO Austin Campbell noted that when citizens seek refuge from oppressive regimes, it may pressure those authorities but can also destabilize the local economy. Despite these risks, many view stablecoins like USDT as a preferable alternative to government-controlled currencies.
Why this story matters
- It highlights the increasing reliance on digital currencies in politically unstable regions.
Key takeaway
- USDT provides a critical means of financial preservation for individuals under authoritarian regimes, despite associated risks.
Opposing viewpoint
- High demand for stablecoins can exacerbate local currency depreciation and instability, potentially undermining economic conditions.
