Bogota-based financial services company Valiu has launched a Bitcoin-powered synthetic USD on Wednesday to simplify cross-remittances for Venezuelans and ultimately circumvent the hyperinflation that is currently hobbling the country’s economic growth.
Making cross-border remittances into a country like Venezuela, which has been long-ridden by severe international sanctions, hyperinflation, and an almost stagnant economic growth can be extremely challenging.
Although several developments have been made to tackle this concern, such as launching a groundbreaking SMS-based crypto payment service that enables Venezuelans to send crypto directly through an SMS, there have been none that primarily address the hyperinflation.
Synthetic USD to tackle hyperinflation
However, Columbia’s payment startup Valiu may have found an answer. On Wednesday, its CEO, Simon Chamorro, took to Twitter an innovative Bitcoin-backed synthetic US dollar, or synthetic USD, that enables cross-border crypto transactions directly to bank accounts in Venezuela.
Although still in the primary Alpha testing stage, the startup has collaborated with a food delivery app called Rappi, which will help it acquire a large user base for the product once it launches full-fledged later this year, the announcement claims.
Chamorro proudly tweeted about his launch by lauding his dedicated team of engineers, who, despite functioning remotely due to COVID-19 lockdown, successfully launched the product after several months of research and pursuing rigorous regulatory approvals.
Cryptodollar for non-crypto users
Although Bitcoin underpins the synthetic USD, it is designed in such a way that even users, who do not have any knowledge of cryptocurrencies, can simply buy and transact in cryptodollars in exchange for cash deposited at one of Valiu’s many remittance partners across Columbia without any fees. All they need is a smartphone and a wallet app.
Sid Ramesh, who is an early-stage advisor to financial startups, posted a video shortly after, demonstrating the whole operation of sending money. The footage showed that Chamorro could send one cryptodollar within 30 seconds.
Meanwhile, speaking to Decrypt about what made him come up with the unique Bitcoin-based synthetic USD project, Chamorro explained that Columbia comprises thousands of immigrant workers traveling from Venezuela every month.
Addressing the need of the hour
Currently, it has over 6 million foreign workers, and a large chunk of them still has no bank account. Because of heavy sanctions, these migrants are forced to resort to black-market activities to avoid expensive fees for sending money back home.
In the past one year, Valium helped over 38000 families in Venezuela with a more accessible money transfer service. Unfortunately, due to hyperinflation, these funds, when accessed in Venezuela in the form of bolivars, lost their value entirely.
Thus, while the app enables users to retain their wealth and purchasing power without losing any value, it also allows them to withdraw bolivars to pay for essential stuff, principally focussing on solving existing user problems rather than creating more.
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