What Has Changed Since LocalBitcoins Transformed Venezuela’s Crypto Finances?

 

Another cryptocurrency service goes offline today. Peer-to-peer Bitcoin exchange site LocalBitcoins announced its closure, citing the difficulties presented by the lengthy crypto winter as the reason why it “can no longer perform its Bitcoin trading service.”

They were an important part of the hardest moments in my country, Venezuela. We will never forget them. Thank you for your service.

— blackarepa (@arepablack) February 9, 2023

Launched in June 2012, LocalBitcoins contributed to the validation of Bitcoin’s primary use case: a decentralized, global P2P electronic payment system. In especially in nations with less than stable political leadership, it propelled Bitcoin into prominence as a significant possibility for building cryptocurrency communities.

Particularly during the most recent hype cycle, Venezuela was one of the most famous countries to adopt Bitcoin.

The main driver of Bitcoin’s widespread use in Venezuela from 2017 to 2019 was LocalBitcoins. The massive volume of transactions in the nation made it known to the rest of the world that Venezuela was using Bitcoin.

Ernesto Contreras, head of business development at Dash and cofounder of the Caracas Blockchain Summit, recalled that it was at that time that he first became familiar with the platform.

Venezuelan LocalBitcoins: A Case Study

Individuals found it challenging to send money from overseas to Venezuela as a result of the United States’ unilateral sanctions against that country’s government. International financial institutions were unable to carry out routine business with Venezuelan financial institutions, and companies like MoneyGram and Transferwise ceased operating there. Due to this, there were few options available to many Venezuelans living abroad who wanted to send money to their families abroad.

This hole was filled by LocalBitcoins, which made quick and secure money transfers possible. This was especially enticing to Venezuelans, who could use Bitcoin as an inflation hedge in addition to dealing with an unpredictable economy, political sanctions, and economic isolation.

Venezuelan crypto advocate Anbal Garrido said:

I started on LocalBitcoins after conducting my own study and because of references from different people. Like any new user, I was initially a little uneasy, but its user-friendly layout made things simple.

Garrido is a notable crypto enthusiast well-known in Venezuela for his educational work and a co-founder of the Caracas Blockchain Week.

LocalBitcoins assisted Venezuelans in using BTC as cash in addition to payment transfers. As a type of dollar replacement, they would purchase Bitcoin and then sell it when they needed fiat money. Additionally, the platform enabled them to utilize their Bitcoin to buy items from other countries using gift cards and shops that accept cryptocurrency.

A Country After LocalBitcoin

The sociopolitical environment in Venezuela made P2P crypto trading more advantageous than regulated platforms. Regulated sites forbade the use of Venezuelan currency, and local cryptocurrency platforms were unstable with low volumes and subpar infrastructure.

Despite initial worries, the closure of LocalBitcoins is probably not going to have much of an impact on the Venezuelan ecosystem.

Garrido said that “for the Venezuelan environment, I don’t think it will have much influence”, noting out that activity surrounding the site has significantly decreased since its peak in 2018. Since so few individuals now use LocalBTC, Contreras concurred: “Today, its closure will not have much of an impact on the Venezuelan market.”

As a matter of fact, activity on the site has decreased since its peak in 2018, and it now only sees a weekly exchange of about 30 BTC, down from the 2487 BTC transacted in February 2019.

Given that Venezuela has been trading less than 100 BTC since February 2021 and fell below the 500 BTC threshold in 2020, the data suggests that the issues with LocalBitcoins began well before the crypto winter.

Poor Decisions and Crypto Winter: A Deadly Combination

Many companies have suffered fatal blows as a result of the crypto winter, and LocalBitcoins is no different. A number of factors, according to experts, contributed to the decline of LocalBitcoins. First off, its “Bitcoin Only” policy turned out to be unfavorable over time, especially once Binance entered the market and started offering a variety of tokens, including stablecoins, which were more appealing to people looking to lessen their exposure to market risks.

Additionally, LocalBitcoins’ old and confusing user interface might have contributed to its demise. The needs of 2023 are different from those of 2012, according to Contreras.
Although Binance does not have an open policy for inspecting the volume of transactions on its P2P market, it has nonetheless emerged as the standard for cryptocurrency investors who like P2P trading.

There are few alternatives available to those who do not wish to use Binance.
Both Paxful and Uphold have left the nation, and the majority of centralized exchanges don’t provide services for converting cryptocurrency to fiat.

The two most significant choices for Venezuelans are Bisq, a private and decentralized P2P exchange, and HodlHodl, a KYC-free P2P exchange platform that accepts a variety of payment methods, including Petro (the nation’s official cryptocurrency). In contrast to CZ’s behemoth, both choices have a low acceptance rate.

Because of this, it’s safe to conclude that LocalBitcoins was already dead in the eyes of many citizens, even though it opened a crucial chapter in Venezuela’s crypto history. The declaration made today just acted as formal notification that LocalBitcoins will no longer be available to them. What about Venezuela’s post-LocalBitcoins era?

According to Garrido:

The gap created by LocalBitcoins couldn’t be filled by Binance. Fair enough, Binance had already done it.

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