Crypto gains foothold in Bolivia as small businesses seek currency alternatives

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4 days ago

An advertisement for the cryptocurrency Bitcoin is displayed on a building in Hong Kong on Nov. 18, 2021. (AP Photo/Kin Cheung, File)
COCHABAMBA, Bolivia — In the busy shopping district of the Bolivian city of Cochabamba, ATMs let shoppers swap coins for cryptocurrency, beauty salons offer cut-price deals if you pay in Bitcoin, and people use Binance accounts to buy fried chicken.
Bolivians are facing a rising economic crisis, with reserves of dollars near zero, inflation at 40-year highs and fuel shortages causing long lines at the pump. The country's currency has lost half its value on the black market this year, even as the official exchange rate has been held artificially steady by government intervention.
Some Bolivians are now turning to crypto exchanges like Binance, cryptocurrencies like Bitcoin, and stablecoins like Tether as a hedge against the depreciation of the boliviano.
Official data is patchy, and cryptocurrency was outlawed in Bolivia until last year, but the most recent central bank figures showed transactions of digital assets at US$24 million in October. Analysts estimate it has since risen significantly.
In the speed of uptake, 'Bolivia is now comparable to countries like Argentina and Venezuela,' said Mauricio Torrelio from the Bolivian Blockchain Chamber.
The overall size of the market, though, remains well behind those South American neighbors and other transactions domestically.
Jose Gabriel Espinoza, former head of Bolivia's central bank, estimated that daily USDT volumes hover around US$600,000, a fraction of the US$18-US$22 million in the formal financial sector and US$12-US$14 million in the cash-based black market.
'While crypto is growing, it's still a nascent market,' he said.
Torrelio said Binance was the most popular platform locally, for its relatively low transfer fees and peer-to-peer trading. The world's largest cryptocurrency exchange, Binance has come under scrutiny globally. It agreed to pay a fine of over $4.3 billion in 2023 after pleading guilty to violating U.S. laws against money laundering.
In Cochabamba, Pablo Unzueta's steakhouse Bros allows customers to pay via Binance accounts or buy Bitcoin using an ATM linked to Blink, a crypto wallet developed in Central American country El Salvador - which made waves in 2021 when it made Bitcoin legal tender.
'If you go to the banks today, they don't have dollars,' Unzueta told Reuters. 'Paying for a chicken with Bitcoin or saving in Bitcoin is the most innovative and promising thing a city like Cochabamba can do.'
Unzueta demonstrated how the ATM works, feeding a one-boliviano (US$0.14) coin into the machine.
'The idea is to move away from the piggy bank and instead use this technology.'
Carla Jones, a local spa and salon owner, offers incentives to customers who pay with crypto assets, which she said both attracted younger customers and acted as a savings safeguard.
'If you buy three tanning sessions, you get a discount if you pay with Bitcoin,' she said. 'It's a way to keep my money safe and also try to grow my wealth.'
'This is not a sign of stability'
Bolivia is facing its most acute economic crisis in a generation. Dwindling domestic gas production has forced it to import costly fuel, eroding its foreign currency reserves, and making it hard to continue to pay for imports.
The lack of dollars has spawned a black currency market, with a wide gap between the formal and parallel FX rates. On the street, you need over 16 bolivianos to buy a dollar versus the largely symbolic official rate of around 6.9 per dollar.
Crypto proponents have pushed blockchain-based tokens as an answer.
On June 7, Tether chief executive Paolo Ardoino posted photos from a duty-free shop in the Bolivian city of Santa Cruz, showing items like sunglasses and Oreo cookies priced in USDT, the firm's dollar-pegged stablecoin.
'A silent revolutionary shift: digital dollars powering daily life, commerce, and economic stability,' he said on X.
Economists, however, warned it was not so rosy.
'This isn't a sign of stability,' said former central bank head Espinoza. 'It's more a reflection of the deteriorating purchasing power of households.'
Peter Howson, assistant professor in international development at Northumbria University in Britain, warned that Bolivians would be vulnerable to crypto's constant fluctuation in value.
'We've seen in Bolivia and across Latin America, what we call 'crypto-colonialism'. Crypto companies try to convince the rural poor to invest what little real money they have in a cryptocurrency,' he told Reuters.
'When it goes down in price, no vendor wants to accept it.'
But in Cochabamba, 35-year-old Andree Canelas is a Bitcoin enthusiast, helping install crypto ATMs in shops and cafes.
'More and more people have understood that if they save bolivianos and keep them in their tills for too long, they're going to lose purchasing power,' Canelas said.
Cryptocurrencies did come with risk, he said, but added: 'They may see some volatility in the short or medium term, but long term it's a good store of capital.'
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Reporting by Santiago Limachi in Cochabamba and Lucinda Elliott in Montevideo; Additional reporting by Monica Machicao in La Paz, Elizabeth Howcroft in Paris, and Ipa Ibáñez in Santa Cruz; Editing by Adam Jourdan and Rosalba O'Brien