Earlier today, news broke that the central bank of Venezuela is pondering whether it would be advantageous for the country to hold cryptocurrency reserves.
The nation’s state-run oil company Petroleos de Venezuela SA is apparently considering Bitcoin (BTC) and Ether (ETH) to pay suppliers via the central bank. This situation seems to have borne out of the company’s restricted ability to send payments via corresponding banks which have instituted sanctions against the country.
Petroleos de Venezuela SA reportedly has a stash of cryptocurrencies and is hoping for the central bank to use the funds to pay suppliers. The article, citing people wishing to remain anonymous, says that the bank is also exploring how digital assets like Bitcoin could become part of the nation’s international reserves.
“Staffers are also studying proposals that would allow cryptocurrencies to be counted toward international reserves, now near a three-decade low at $7.9 billion,” Bloomberg says.
It’s unknown how Petroleos came to own Bitcoin and Ethereum, or the value of its holdings, but it’s not hard to see why the company would want to avoid selling its coins on the open market. Cryptocurrency exchanges adhere to industry-wide due diligence checks, something which would become an issue for Petroleos considering the country’s financial sanctions.
Instead, it wants the central bank, which the company believes is less exposed to potential blocks, to use the cryptocurrency assets to pay entities Petroleos owes money to.
Bitcoin and Ethereum use decentralized, online ledgers known as blockchain to verify and record transactions. In some cases that allows for relatively anonymous transfers without the need for a middleman – but it also needs the receiver to accept payments in BTC or ETH.
According to Thiago Cesar, CEO of Bitcoin over the counter (OTC) broker Transfero Swiss which operates in Switzerland and Brazil, the biggest OTC demand for Bitcoin in Brazil is from companies that want to pay suppliers in China and vice versa.
According to him some Chinese suppliers even provide discounts if payments are made in the digital currency. He added that there’s a premium for BTC in Venezuela, but a discount in neighboring Colombia.
Since Bitcoin became very popular with the Venezuelans following the devaluation of their currency, they would go to Colombia to sell their Bitcoins and get Pesos.
Venezuela would be the first state to adopt Bitcoin as a reserve currency, and this would represent a monumental step for the digital asset space. While the U.S. would likely continue to push sanctions onto the country, Bitcoin could slowly gain popularity among other central banks as payments start flowing between one another.
Central banks currently sometimes trade with each other in gold, unless they go through international banks. Gold however is difficult to transport, while Bitcoin-routed transfers worth $1 billion has settled within one hour with negligible fees.