By Robert Hackett, Jeff John Roberts, and Jen Wieczner
February 25, 2019

Inflation in Venezuela soared above one million percent last year and the local currency is worthless. Meanwhile, the dictator who wrecked the economy is ordering thugs to torch crates of foreign aid containing food and medicine. The country is suffering but one man has found a way to cope. In a weekend op-ed for the New York Times, economist Carlos Hernandez explained how Bitcoin has literally saved his family by letting him hold money that can’t be deflated or stolen by the government.

Needless to say, the op-ed was a hit with the crypto crowd. Ever since Satoshi gave birth to bitcoin a decade ago, supporters have hailed the currency as a way to subvert bad governments. Now, Hernandez represents real world proof this may be possible. It’s also fitting he is from South America, where reckless monetary policies inspired the crypto dreams of CEOs like Wences Casares of Xapo and Brian Armstong of Coinbase.

Still, it’s worth asking if Hernandez offers real hope for others trapped in a collapsed economy—or if he’s instead an outlier whose story fuels the libertarian fantasies of rich tech types. Skeptics will point out that Bitcoin accounts for a minuscule amount of overall economic activity in Venezuela, and is accepted by only a handful of merchants.

“I´d say it´s tech bro bullshit and a lame attempt to try to promote Bitcoin. Ultimately, people need hard currency to buy groceries. So unless you tell me there’s a way for people to buy groceries with Bitcoins, I can´t see how it would work,” said Rafael Mathus Ruiz, an Argentine economist and journalist for La Nacion, who has experienced his share of economic crises firsthand.

Others have pointed out that Bitcoin is not necessarily beyond the grasp of government. While the currency’s secure cryptography prevents anyone from hacking into a digital wallet, that’s no guarantee the funds are safe. Depraved regimes like the one in Venezuela may resort to physical violence to force Bitcoin owners to disclose the private keys that control their wallets.

But despite these cautions, there’s evidence Hernandez’s story is not unusual, and that Bitcoin in Venezuela is getting more traction every day. In response to a query from Fortune, the analytics firm Chainalysis pointed to a survey and a discussion board that suggest Bitcoin use is on the rise in the country. That view was echoed by David Jevens of CipherTrace, another analytics firms, who said there has been a Bitcoin uptick not just in places suffering from hyper-inflation but those under sanctions or currency controls.

This raises the question of whether the U.S. State Department—or private citizens—who support Venezuela’s opposition party might start distributing aid to Venezuelans in the form of Bitcoin. Perhaps it’s a crazy idea but, as Jevens told me, there’s precedent for Uncle Sam supporting radical decentralized protocols—“The U.S. invented Tor, right?”

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Speaking of economic mismanagement, Coinbase took a closer look at the collapsed crypto exchange Quadriga—whose CEO allegedly took $137 million or more in customer funds to the grave—and suggests the debacle was the result of earlier losses rather than a planned exit scam. Nick Szabo isn’t so sure, noting that the remaining employees might have seized on the CEOs death to get out of a sticky situation.

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Jeff John Roberts
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