LocalBitcoins Transformed Crypto Finances in Venezuela—Now What? – CryptoNewsTo

LocalBitcoins Transformed Crypto Finances in Venezuela—Now What?

Another day, another crypto service shuts down. LocalBitcoins, a peer-to-peer Bitcoin exchange platform, announced its demise, saying it “can no longer provide its Bitcoin trading service” due to the challenges of the protracted crypto winter.

Launched in June 2012, LocalBitcoins helped prove the main use case of Bitcoin: a global P2P electronic cash system free from centralized control. It catapulted Bitcoin into prominence as a huge opportunity for developing cryptocurrency communities—particularly in countries with less than stable political leadership.

Venezuela was one of the most notable national adopters of Bitcoin, especially during the last hype cycle.

“LocalBitcoins was the main reason for the huge use of Bitcoin in Venezuela during the 2017-2019 period. The huge volume moved in the country made the world realize that Bitcoin was being used in Venezuela,” Ernesto Contreras, Head of business development of Dash—and cofounder of the Caracas Blockchain Summit—told Decrypt, recalling that he began to familiarize himself with the platform during that time.

LocalBitcoins in Venezuela: A Case Study

The implementation of unilateral sanctions by the United States against the Venezuelan government made it difficult for individuals to send money from abroad to Venezuela. International banks were unable to conduct normal operations with Venezuelan banks, and businesses like MoneyGram and Transferwise stopped servicing the country. This left many Venezuelans abroad with few options when attempting to send money to their families in other countries.

LocalBitcoins filled this gap by allowing for the reliable and fast transfer of funds. This was especially appealing to Venezuelans facing an unstable economy, political sanctions, and financial isolation, who could also turn to Bitcoin as a hedge against inflation. 

“I started on LocalBitcoins after doing my own research and because of references from third parties,” Venezuelan crypto advocate Aníbal Garrido told Decrypt. “Like any beginner, I started with some nervousness, but its intuitive interface allowed for easy use.”

Besides fund transfers, LocalBitcoins also helped Venezuelans use BTC as cash. They would buy Bitcoin as a sort of dollar substitute and sell it when they needed fiat cash. The platform also allowed them to further use their BTC to purchase international products through gift cards and crypto-friendly stores.

A Post-LocalBitcoin Country

Given Venezuela’s geopolitical situation, P2P crypto trading was preferable to regulated platforms. Regulated platforms did not allow operations with Venezuelan money, while local crypto platforms had limited volumes, poor infrastructure, and were unreliable.

The impact of LocalBitcoins’ closure on the Venezuelan ecosystem is likely to be minimal, despite early concerns.

“For the Venezuelan ecosystem, I don’t think it will have much influence,” Garrido assured Decrypt, pointing out that activity around the platform had declined considerably since its peak in 2018. Contreras agreed: “Today, its closure will not have much impact on the Venezuelan market since very few people currently use LocalBTC.”

Indeed, the platform has seen a decline in activity since its peak in 2018, and it is now only seeing a weekly exchange of around 30 BTC, compared to the 2487 BTC traded in February 2019. 

The figures suggest that the problems with LocalBitcoins started well before the crypto winter, with Venezuela trading less than 100 BTC since February 2021 and dropping below the 500 BTC mark in 2020.

Amount of BTC traded by Venezuelans in Localbitcoins. Source: Coin.Dance

Crypto Winter Plus Poor Choices: A Deadly Mix 

The crypto winter has been a death knell for many businesses, and LocalBitcoins is no exception. Experts attribute the fall of LocalBitcoins to a combination of factors. Firstly, its “Bitcoin Only” approach proved to be a disadvantage in the long run, especially after Binance entered the market offering a wide range of tokens, including stablecoins, which were more attractive to those who wanted to reduce their exposure to market risks.

Additionally, the outdated and unintuitive interface of LocalBitcoins may have played a role in its downfall. ”The needs of 2023 are not those of 2012,” Contreras observed.

Binance, which does not have a transparent policy for auditing its P2P market transaction volume, has nonetheless become the benchmark for cryptocurrency enthusiasts who prefer P2P trading.

For those who do not want to use Binance, their options are limited. Paxful and Uphold have both abandoned the country, and most centralized exchanges do not offer services for exchanging crypto for fiat. 

The most notable options available to Venezuelans are HodlHodl, a KYC-less P2P exchange platform that offers different payment options, even in Petro (the country’s government cryptocurrency), and Bisq, a private and decentralized P2P exchange. However, both options have low adoption compared to CZ’s behemoth.

As a result, even though LocalBitcoins marked an essential chapter in Venezuela’s crypto history, it might be fair to say that it was already dead in the eyes of many residents. Today’s announcement just served as official notice that LocalBitcoins will no longer be there for them. As for the post-LocalBitcoins era in Venezuela?

“It’s not that Binance could fill the void left by LocalBitcoins,” Garrido said. “To be fair, Binance already did.”


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