Peer-to-Peer Bitcoin Trading Surges in Venezuela

"How can you stop software running on the internet?"


On February 2, Venezuela's leading bitcoin exchange, SurBitcoin, was forced to suspend operations when its bank account was revoked. According to Rodrigo Souza, who runs SurBitcoin's trading platform, the bank closed the account in anticipation of a nationwide crackdown on bitcoin use in Venezuela after the police raided a warehouse with 11,000 mining computers. SurBitcoin is in talks with other banks, and hopefully it will be operating again soon.

At its core, Bitcoin is a peer-to-peer system that allows users to exchange digital currency without permission from the government or any third party. That's why it's the ultimate libertarian technology. Bitcoin exchanges, like SurBitcoin, however, are subject to government control because they buy and sell bitcoins on behalf of their users and rely on a company bank account to collect and pay out money.

As Souza stressed in an interview last year, exchanges like SurBitcoin aren't actually necessary. They make buying and selling bitcoins more convenient, but users can always revert to peer-to-peer trading. As Souza put it, "how can [the government] stop software running on the internet?"

As he predicted, SurBitcoin's closure has led to a surge in peer-to-peer trading. LocalBitcoins, a site where users connect to buy and sell bitcoins, makes its trade volume public through an API. (See the chart below.) Last week, 464 bitcoins were exchanged in Venezuela on LocalBitcoins, the equivalent of nearly $470,000 dollars based on today's price. That's close to a 50 percent increase in volume since SurBitcoin stopped operating. (LocalBitcoins' previous trading volume peak was 377 bitcoins the week of October 15, 2016, but, at the time, bitcoin was worth almost 40 percent less than it is today.)

SurBitcoin's average weekly trade volume was about 330 bitcoins when it shutdown. So about two-thirds of SurBitcoin's activity has move to LocalBitcoins. (A similar phenomenon is happening in China.)

LocalBitcoins Venezuelan volume (BTC) |||

Why is bitcoin in Venezuela seemingly inexorable? For more, read "The Secret, Dangerous World of Venezuelan Bitcoin Mining." Or listen to this week's episode of EconTalk with Russ Roberts, where I discussed bitcoin in Venezuela and the impact cryptocurrency is having throughout Latin America.

As I told Roberts, I first learned about bitcoin when listening to 2011 EconTalk interview he did with Gavin Andresen, a pioneer in the field. I remember thinking, "this can't possible work." Six years later, in part through my reporting on Venezuela, I'm convinced bitcoin will change the world.

Listen to the interview below. (Bonus link: Nick Gillespie interviewed Russ Roberts in 2014 about his book on Adam Smith.)

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  1. Damn! Venezuela gets a real libertarian moment and all we get is this lousy thread.

    1. It appears that in order to get to a real libertarian moment, you may have to go through a Communist moment (or two) first. Which really sucks.

      1. Didn’t that just happen here in the U.S.?

        1. Halfway there!!

      2. Well, that or just sneak in a libertarian moment quietly in a back alley while hiding from said communist moment that’s still very much ongoing.

  2. Is it really a libertarian moment if the bit coins are mined using government paid for electricity?

    1. I honestly think Reason may be misreading the tea leaves a bit. At least, assuming that a government crackdown leads/lead to a measured shift in liquidity on another exchange… therefore liberty seems exceedingly naive.

  3. Out of curiosity, do we have any indication who’s exchanging these bitcoins?

    I mean, if I were a corrupt fascist regime looking to make a quick buck to enrich my or my crony’s coffers, buying a bunch of bitcoins and cracking down on the local exchange would seem to be a phenomenal ideal. Not to say that this is conclusively happening but the very foundation of bitcoin was that it can/could happen and people wouldn’t be able to know/stop it.

    1. The real question is how many bitcoins does it cost to subscribe to your newsletter?

  4. I first learned about bitcoin when listening to 2011 EconTalk interview he did with Gavin Andresen, a pioneer in the field. I remember thinking, “this can’t possible work.”

    Good time to get in.

    Six years later, in part through my reporting on Venezuela, I’m convinced bitcoin will change the world.

    Uh-oh. Good time to get out.

    1. eh, people were saying that it’ll change the world back then too. They were right, but they thought that it would replace government currency and that’s absurd, of course.

  5. Hugo Chavez – his legacy lives on!

    Maybe he will be remembered as the guy who sparked the widespread use of Bitcoin, and all his BS will be forgotten. In 2100 he may be celebrated as a hero. Like Che Guevara.

  6. Who wants to see my cockchain?

  7. “how can [the government] stop software running on the internet?”
    Easy, it can stop the internet.
    As long as there is coercion in Venezuela, the bolivar ain’t going nowhere. The shotgun still sings the song, right? You still have to pay your taxes in bolies.

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