Cryptocurrencies in hyperinflationary Venezuela

Abstract

This literature review covers hyperinflation in Venezuela, from the 1980s to the present. Particular emphasis is placed on the role of cryptocurrency in the country and how the Venezuelan government has been using crypto, specifically the Petro, as a means to avoid further blunders with hyperinflation. From Hugo Chávez and “Socialism of the 21st Century” to the current regime of Nicolás Maduro, Chávez’ successor, the printing of money in Venezuela has sky-rocketed to the point of the government needing cryptocurrency, such as Bitcoin, as a means of circumventing inflation to fund the government’s ambitious social projects. A key element in its success, however, will be whether the Venezuelan people will opt to use the government-backed Petro, or whether they will opt to use a different, decentralized alternative digital currency to avoid the perils of hyperinflation. The paper will examine this issue from several diverse points of view: specifically, the Austrian School (Echarte Fernández, Hernández, & Zambrano, 2018), the neo-Keynesian school (Pagliacci & Barráez, 2010), and public policy and institutional perspective (Corrales, 1999). The use of cryptocurrencies by governments, in particular socialist governments, is a new occurrence and merits much attention for the future of public and monetary policy in those countries.