Initiative launched with government support marks a global first with use of stablecoins for foreign aid.
Unique private-public partnership, stablecoin solution, and distribution channel represented only viable option available to the Republic to distribute funds while avoiding censorship by the Maduro regime.
Earlier this year, Circle was approached with a significant and important challenge — could we help the legitimate elected government of Venezuela distribute desperately needed aid to front-line medical workers in Venezuela as they battled coronavirus, while suffering from the impacts of hyperinflation, international isolation and sanctions, and economic collapse due to Nicolás Maduro's disastrous policies and profligate money printing. Medical supplies and equipment are scarce as the import/export market has been destroyed by currency and capital controls. Wages paid to healthcare workers evaporate quickly due to hyperinflation, and now doctors are starving and cannot do their work. The result is a situation where patients too are starving, driving more compromised immunity, lack of treatment and death.
Through a collaboration with the Bolivarian Republic of Venezuela, led by President-elect Juan Guaido, U.S.-based fintech innovator Airtm, and coordination with the US government, we were able to put in place an aid disbursement pipeline that leveraged the power of USDC — dollar-backed, open, internet-based digital currency payments — to bypass the controls imposed by Maduro over the domestic financial system and put millions of dollars of funds into the hands of people fighting for the health and safety of the people of Venezuela.
South America is one of the hardest hit continents for COVID-19. Amnesty International says that the number of infections reported by the Venezuelan government is likely underreported and has also seen reports of healthcare workers being arrested for speaking out about unsafe working practices since the pandemic began. Doctors have been fleeing the country in recent years, and those healthcare workers that remain are grossly underpaid (earning between USD 4 and USD 18 per month) and lacking personal protective equipment (PPE). Donations of PPE are either not reaching the intended recipients or are barely making a dent in the amount that is still required. With imposed currency controls, typical bank receipts are subject to rigged forex rates, making banks useless for receiving payments, donations and remittances.
After Maduro seized and held onto power in January 2019, the US Treasury Department imposed sanctions on the Maduro regime, allowing the US government to seize assets that were intended for Maduro and his government.
Seeking to get those funds into the hands of the Venezuelans fighting COVID-19, governments turned to blockchain and fintech innovation to deliver.
USDC to the rescue
In this new aid delivery flow, seized funds are released to the Guaidó government’s account at a US bank. The Guaidó government then uses those funds to mint USDC. The USDC is then sent to Airtm, a bank-and-blockchain connected dollar-denominated payment platform that powers digital dollar payments throughout North, Central, and South America. Airtm’s network of dollar-to-anything forex agents enables withdrawals to local currency in Latam bank accounts at free market (vs. government-rigged) rates. Once the USDC is received on Airtm wallets, it is then dispersed to accounts of Venezuelan healthcare workers as AirUSD (Airtm's stablecoin-backed dollar token). The healthcare workers are then able to withdraw to their local bank accounts as bolivars at free market rates, send to other users, or even spend the funds online anywhere using Airtm’s virtual debit card - bypassing the need for a bank at all. With over half a million users in Venezuela, Airtm’s network is big enough to support enough peer-to-peer transactions to make this a viable solution for day to day transactions such as paying rent.
Much of the local economy in Caracas, the urban capital and metropolis, is already a dollarized market where grocery stores and businesses quote in dollars. Scarcity of goods has continued to be a major problem under the Maduro government, and increasingly it’s now also a problem with a scarcity of dollars themselves.
Whereas the Maduro regime imposes extreme controls and rates on funds sent directly to Venezuelan bank accounts, it has no ability to apply these controls on crypto transactions — once they’re sent on-chain they can be received into Airtm wallets seamlessly.
Similarly, Maduro can’t stop ordinary Venezuelans from setting up an account with Airtm, or accessing their funds there. While the Maduro government has said that they will attempt to block the use of Airtm’s website and app in Venezuela, anyone who has travelled will tell you VPN services are easy to set up to get around geo-blocks — Guaidó himself has even provided instructions on setting up a VPN.
All of this is powerful, inspiring, and underscores the ability of the internet and digital currency to transform not just how value and money moves, but ultimately also the freedom of people to transact, even in the face of brutal dictatorships. It also marks a historic moment where in order to execute on foreign aid objectives, economic and political leaders have turned to stablecoins. While this may be the first time, it will no doubt not be the last as global stablecoins firmly arrive on the world stage as a foundational infrastructure in the future of the international monetary system.