Tether (USDT) stable logo.
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between the US Military intervention in Venezuelalocals rushed to secure their savings by exchanging their bolivars for dollar-pegged digital tokens called USDT. The timing of the attack may have been surprising to some, but the subsequent adoption of stablecoins by Venezuelans was not.
From the Middle East to Latin America, ordinary people are turning to USDT to hide and store their wealth from authoritarian regimes and to hedge against hyperinflation. And now with the US president Donald Trump By threatening to intervene in local affairs in Colombia and Iran, this survival strategy may gain even more traction.
“Stablecoins are a good dollar, but the reason people get them is out of necessity and self-preservation,” Mauricio Di Bartolomeo, founder of digital asset lender Ledn, told CNBC. “Wherever they have restrictions on the free flow of dollars, stablecoins will be out the door.”
According to Di Bartolomeo, since 2014, the digital currency issued by stability giant Tether has become popular in Russia, Iran and other emerging economies, especially as political instability increases. With USDT, people can send and receive money transfers, protect their money against local currency depreciation, and pay for goods and services.
Not so stable?
While USDT may seem like the perfect solution to using “virtually worthless” fiat like the Iranian rial and the Venezuelan bolivar, the token — like most things — isn’t perfect, Di Bartolomeo said.
While stablecoins like USDT are always designed to be equal to $1, their price is not always stable, especially when demand increases.
Demand for USDT increased following the US attack on Venezuela earlier this month, which led to the token trading around $1.40 on some peer-to-peer exchanges.
This fluctuation in value reflects liquidity issues in the cryptocurrency market, which has hindered mass adoption of digital assets. However, it also speaks to the fact that virtual currencies are seen as an “escape valve” among people living in extreme political and economic conditions, Haonan Li, founder and CEO of stablecoin infrastructure firm Codex, told CNBC.
“It was violence fueled by fear,” Lee said. “As confidence in the bolivar collapses, demand for dollars via Tether explodes, sending Venezuela’s USDT up nearly 40% overnight.”
He said the incident was not caused by speculative activity among retailers. By contrast, in an emergency, “they tried to get out of fiat as quickly as possible,” Lee said.
“The increase in demand has created arbitrage opportunities, but more importantly it has shown how stablecoins can act as real-time safety rails in emerging markets when traditional systems break down,” he added.
The situation has forced some Venezuelans to pay a premium to exchange their bolivars for USDT, trying to secure their savings through a digital, dollarized solution. And this is one of several possible risks that stablecoins can pose.
Exchanging high volumes of fiat for dollar-pegged stablecoins will result in high capital inflows, which could contribute to the depreciation of the local currency, Austin Campbell, CEO of Zero Knowledge Consulting, told CNBC.
“If you have a very repressive regime, frankly, with respect to all of its citizens, giving everyone a way to get their money out from under the regime and do whatever they want, that can cause the local currency to collapse,” said Campbell, an adjunct professor at New York University.
However, such a situation is not always a bad thing, noted the stablecoin expert. A devaluation of the local currency can also serve the purpose of “putting pressure on the regime and causing problems for them. So it might be an exception rather than a bug,” Campbell said.
And, to be sure, any risk involved in using stablecoins in reputable modes is worth the reward, he said.
“The only other option is if the government steals all your money, (USDT) is still a good option,” Campbell said.