Venezuelans turned to Tether-issued USDT stablecoin as its government wobbled
Tether (USDT) stablecoin logo.
Cost photo | Nurfoto | Getty Images
During the US military intervention in Venezuela, locals converted their bolívars into dollar-pegged digital tokens called USDT to secure their savings. The timing of the attack may have been surprising to some, but it was no surprise that Venezuelans later embraced stablecoins.
From the Middle East to Latin America, ordinary people are turning to USDT to hide and protect their wealth from authoritarian regimes and protect themselves against hyperinflation. And now, with US President Donald Trump threatening to intervene in domestic affairs in Colombia and Iran, this survival strategy may gain even greater traction.
“Stablecoins are better dollars, but the reason people buy them is out of necessity and to protect themselves,” Mauricio Di Bartolomeo, co-founder of digital asset lender Ledn, told CNBC. “Wherever there are restrictions on the free flow of dollars, stablecoins will come through the door.”
According to Di Bartolomeo, the digital currency issued by stablecoin giant Tether since 2014 has become increasingly common in Russia, Iran and other emerging economies, especially during periods of increased political instability. Using USDT, people can send and receive remittances, protect their money from local currency depreciation, and pay for goods and services.
Isn’t that stable?
Di Bartolomeo noted that while USDT may seem like the perfect solution for using “nearly worthless” fiats like the Iranian rial and Venezuelan bolivar, the token — like most things — isn’t perfect.
Although stablecoins like USDT are designed to always equal $1, their prices do not always remain stable, especially when demand increases.
Demand for USDT increased due to the US attack on Venezuela earlier this month, causing the token to rise to around $1.40 on some peer-to-peer exchanges.
This fluctuation in cost underscores ongoing liquidity issues in the cryptocurrency market that hinder mass digital asset adoption. However, Haonan Li, co-founder and CEO of stablecoin infrastructure company Codex, told CNBC that this also shows how virtual currencies are seen as an “escape valve” among individuals living in extreme political and economic conditions.
“This was a violent repricing driven by fear,” Li said. “As confidence in the bolivar collapsed, demand for dollars via Tether exploded, and the peer-to-peer USDT price in Venezuela rose nearly 40% almost overnight.”
He added that the incident was not due to speculative activities among retail traders. Instead, “they were trying to get out of fiat as quickly as possible” in an emergency, Li said.
“This increase in demand has created arbitrage opportunities, but more importantly, it has revealed how stablecoins act as a real-time safety rail in emerging markets when traditional systems collapse,” he added.
This temporarily negatively impacted some Venezuelans trying to secure their savings through a digital, dollarized solution, forcing them to pay a premium to convert their bolívars into USDT. And this is just one of several potential risks that stablecoins can pose.
Zero Knowledge Consulting CEO Austin Campbell told CNBC that converting large volumes of fiat currencies into dollar-pegged stablecoins leads to high capital outflows, which can contribute to local currency depreciation.
“If you have a very oppressive regime, to put it bluntly, against all its citizens, giving everyone a way to get their money from the regime so they can do whatever they want, it could cause the local currency to collapse,” said Campbell, who is also an adjunct professor at NYU.
However, the stablecoin expert noted that such a situation is not always a bad thing. Depreciation of the local currency can also serve a “selling” purpose.[ting] Pressure on the regime and the reasons[ing] their problems. So this may be a feature, not a bug,” Campbell said.
And of course, any risks involved in using stablecoins under authoritative regimes are definitely worth rewarding.
“When the only other option is for the government to steal all your money, [USDT] It’s still the better option,” Campbell said.
