Valiu, a Colombian-based startup that deals with cross-border remittances, has recently launched synthetic US dollars backed by Bitcoin to fight against inflation.
Venezuela is a country that suffers from constant hyperinflation. Transactions with the country are quite difficult. The restriction of US dollars makes it all the more complex. But it looks like Valiu has found a way to tackle the issue.
Last year Valiu has launched a service to allow Colombian people to send money directly to bank accounts in Venezuela. As the next step in the process, the platform has tweeted yesterday (on 23rd April 2020) that the testing of ‘Bitcoin-backed synthetic US dollar savings account’ was going on.
Simon Chamorro, a native Venezuelan and the CEO of Valiu, took to Twitter to share the news about Valiu’s crypto-dollar. He mentioned how the team worked hard for four months by dedicating ‘80+ hour work weeks’ and 500+ lines of code written by four engineers. The team has handled the entire process remotely due to COVID-19.
He announced that the crypto-dollar is now live and is running in Alpha. Valiu has partnered with Rappi, a food delivery app in Latin America. The customer base would be useful in helping the platform adopt the full version, which is set to be released later this year.
Though the synthetic dollars are backed by Bitcoin, customers and users who have no idea about the cryptocurrency can easily make a transaction using the crypto-dollar. The synthetic dollars are going to be stored in an e-wallet app that can be used on smartphones. Venezuelan users can send each other money using the app for free. Users will have to buy the synthetic dollar by depositing cash at any of the remittances partners of Valiu in Colombia.
Hyperinflation and Crypto-dollar
Even with Valiu helping around 38,000 Venezuelans families in accessing funds to buy essentials and make payments, the currency when converted to bolivars losses its value in no time at all. The money earned was hardly worth anything, thanks to the inflation.
To help find a solution, CEO Simon, along with his team, contacted Alejandro Machado of the OMI (Open Money Initiative) for help. Alejandro Machado is now the Head of Research at Valiu. Earlier this month, Machado tweeted about dollars not making it across the borders due to COVID-19. Almost 99% of the remittances were in bolivars.
While Bitcoin was used by only a tiny population of Venezuela, people were good at digital payments. Dollars are scarce and are used to preserve wealth. This led CEO Simon and his team to work on creating a connection between bolivars, Bitcoin, and dollars.
Valiu has created a group on the social networking site, Facebook, for users to know more about this new service. If the synthetic dollar becomes successful in Venezuela and Colombia, this could help thousands of migrant workers and other users in Latin America to fight inflation and face the uncertainties in the economy due to COVID-19 crisis.
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