The exiled government of Venezuela is collaborating with the stablecoin provider ‘Circle’ and the cryptocurrency company ‘AirTM’ after receiving authorization from the U.S. Government to allocate funds to healthcare professionals, circumventing Nicolás Maduro in support of Juan Guaidó’s leadership of the Bolivarian Republic.
Following the national assembly’s declaration of Maduro as an “usurper,” Guaidó was proclaimed the acting president of Venezuela in January 2019 after an election marred by allegations of fraud aimed at consolidating Maduro’s hold on power.
Guaidó has garnered recognition from various nations, including the United States. Nonetheless, U.S. efforts have yet to successfully displace President Nicolás Maduro, despite the deteriorating economic and health situations exacerbated by the pandemic.
The USDC Stablecoin as a Foreign Policy Tool
Circle is utilizing USDC, a stablecoin pegged to the dollar, to channel these relief funds in a project envisioned as a potential remedy for Venezuela’s economic woes.
- Initiated with U.S. Government backing, this endeavor is a pioneering global foreign policy move employing stablecoins for international aid.
- Circle, the creator of the USDC stablecoin, is establishing a unique private-public partnership.
- The fund distribution is designed to evade censorship from the Maduro government.
- This initiative aims to tackle the persistent economic crisis in Venezuela.
As USDC is tied to the U.S. dollar, it remains stable against the drastic fluctuations of the Venezuelan bolivar, which experienced an inflation rate of 2,358.5% in 2020 alone. Additionally, being a digital currency, it facilitates easier distribution to those in critical need.
According to Circle’s blog, this initiative involves the U.S. Treasury and Federal Reserve making funds available to the Guaidó government, which will use these to mint USDC. The new aid channel allows funds to be delivered through AirTM’s service, enabling direct transfers to the wallets of Venezuelan healthcare workers, thus avoiding dealings with Venezuelan banks.
All local beneficiaries require is a mobile phone and internet access to receive stablecoins.
The Circle Team Blog elaborates:
“In this new aid delivery model, the US Treasury and Federal Reserve release seized funds to an account of the Guaidó government at a U.S. bank. The Guaidó administration subsequently uses those funds to mint USDC. This USDC is transferred to Airtm, a payment platform that combines both banking and blockchain, facilitating digital dollar transactions across North, Central, and South America. Airtm’s network of dollar-to-anything foreign exchange agents allows for withdrawals to local currencies in Latin American bank accounts at fair market rates (as opposed to rates manipulated by the government). Once the USDC reaches Airtm wallets, it is then dispersed to the accounts of Venezuelan healthcare workers as AirUSD (Airtm’s stablecoin-backed dollar token). The healthcare professionals can withdraw funds to their local accounts in bolivars at fair market rates, send them to other users, or use the funds online with Airtm’s virtual debit card, completely circumventing traditional banks. With over half a million users in Venezuela, Airtm’s network is adequately equipped to support enough peer-to-peer transactions for essential daily activities, such as rent payments.”
Currently, Airtm serves around 500,000 users in Venezuela who, under Circle’s agreement, will be able to distribute USDC to any of its mobile digital wallet users. This initiative is expected to provide critical support by enabling Venezuelans to conduct transactions in US Dollar Stablecoins.
This also represents a pivotal moment for Airtm, especially after the Maduro administration blocked the exchange from distributing $18 million in aid just a few months prior. This serves as a stark example of the policies that have drawn significant international criticism since the onset of the Venezuelan crisis.
This is truly a landmark case where the U.S. is applying a global foreign policy goal through the use of stablecoins for international aid, as the conventional dollar banking system lacks the capabilities that contemporary payment systems offer.
Circle concluded,
“This approach is powerful and inspiring, highlighting how the internet and digital currency can not only enhance the movement of value and money but ultimately ensure people’s right to transact even amid oppressive regimes. It also signifies a historic shift towards the use of stablecoins in achieving U.S. government foreign policy goals. While this might be a groundbreaking instance, it certainly won’t be the last as global stablecoins establish themselves as a critical component of the future international monetary framework.”
(Source: https://www.circle.com/blog/circle-partners-with-bolivarian-republic-of-venezuela-and-airtm-to-deliver-aid-to-venezuelans-using-usdc)
