BCV Dollar (official rate)

Average dollar

Parallel dollar

Venezuela's currency crisis: cryptocurrency boom and arrests for spreading the parallel dollar on social media Interior Minister Diosdado Cabello announced that 20 people have been arrested for spreading a dollar exchange rate on social media that differed from the official market rate. The currency is plummeting against the dollar, and inflation is accelerating. The parallel exchange rate has been triggered by the arrest of 20 people allegedly linked to Monitor Dólar, a social media account that reported the unofficial exchange rate. The measure seeks to strengthen the Central Bank's control over the exchange rate amid the constant devaluation of the bolivar. However, far from eliminating alternative indicators, it is likely that cryptocurrency platforms like Binance will consolidate themselves as the new benchmark for many Venezuelans.

Interior Minister Diosdado Cabello stated that the government had been investigating platforms that publish the value of the parallel dollar for days. "We have been working for days with these people who have platforms to say that the dollar is worth I don't know how much. The first one has already fallen, the first structure has already fallen. 20 people have been arrested. An investigation as things should be done, silently, without abuse of any kind. We caught them and brought them before the Public Prosecutor's Office, the courts," he stated.

Through its Instagram and X accounts, Monitor Dólar became the indicator that many Venezuelans watched daily to find out the dollar's exchange rate in the market not regulated by the Central Bank. Attorney General Tarek William Saab announced the name of one of the detainees and his charges.

Carlos Pérez, the prosecutor explained, was arrested for the crimes of "terrorism, money laundering, unlawful fundraising, deceptive offers, and association." He added that "through the Monitor Dólar user account, he made false publications, exorbitantly increasing the price of the dollar, in violation of the Central Bank's established exchange rate; all of this with the aim of destabilizing the economy and harming the public."

The Currency Crisis The gap between the official and parallel exchange rates reaches 38%, reflecting an imbalance in which the demand for dollars far exceeds the supply available in the official market. Faced with this limitation, those unable to access sufficient foreign currency turn to the parallel market, which operates primarily through private sector exchange desks and cryptocurrency platforms.

For most economists, the epicenter of the imbalance is clear. To finance public spending, the Maduro administration issues bolivars through the Central Bank. These funds enter the economy through public sector payments and quickly end up in the coffers of companies, businesses, or in the bank accounts of individuals, who use them to acquire dollars. So far this year, as a result of the currency issue, liquidity has increased by 42%.

The issuance of bolivars increases pressure on the foreign exchange market. Money isn't paper, metal, or electronic transactions; it's faith in the institutions that back it, and Venezuelans no longer want to hoard bolivars; therefore, the rise in bolivars in the economy leads to greater demand for dollars.

Many businesses and shops use the parallel exchange rate as a reference to calculate replacement costs, which directly influences inflation. In the first four months of this year alone, inflation has risen by 63%, according to the Venezuelan Finance Observatory.

José Guerra, former manager of the Central Bank and director of the Observatory, warns that the government will fail in its attempt to have the official exchange rate have the greatest impact on prices because "the official dollar does not cover all demand. If there were no unmet demand, there would be no other exchange rate."

The Desire for Control In the official market, the Central Bank and private companies, mostly foreign oil companies, sell dollars. Given the increase in demand, the exchange rate has risen from 50 bolivars in December to 96 bolivars currently. Despite this increase, the number of bolivars in circulation continues to drive demand, and the exchange rate is far from stabilizing.

“In reality, there is de facto control in the official market. The rate isn't set by the relationship between supply and demand, but rather is kept artificially lower. They don't deliver all the dollars you want to buy, and now they're going after the parallel market,” says a businessman who prefers to remain anonymous.

For his part, José Guerra believes that “the idea of ​​going after the parallel dollar and the websites that reflect it has already been seen in the past, but the problem isn't the website, it's the exchange rate imbalance.” “We'll surely see new websites or indicators like the one for cryptocurrencies through the Binance platform,” he points out.

Cryptocurrencies Platforms like Binance allow Venezuelans to buy cryptocurrencies with bolivars and then sell them to buy dollars, thus offering businesses and individuals an alternative to the official market.

Through these transactions, using cryptocurrencies like Bitcoin, an exchange rate emerged that began to gain relevance after the police operation against Monitor Dollar. On Thursday morning, the "Binance dollar" quote was circulating in various WhatsApp groups as a new benchmark.

In October of last year, a study by Chainalysis, a US company specializing in blockchain technologies, stated that the cryptocurrency market in Venezuela grew by 110% in the second quarter of 2024. This increase suggests that the use of this alternative has been gaining ground since then.

Fewer Dollars The United States tightened sanctions against the Maduro government, eliminating licenses that allowed foreign companies like Chevron to produce and export oil from Venezuela. To pay taxes and royalties, these companies sold dollars on the official market, providing approximately 40% of the supply.

The Venezuelan state oil company, PDVSA, will assume control of the oil wells, but to circumvent the sanctions, it will have to sell crude oil through intermediaries at discounts of between 30% and 50% off the market price. In this context, the supply of dollars on the official market is expected to decrease in June, and the exchange rate crisis is expected to worsen.