Dr. Doom might not be a fan, but some economists are coming around to the blockchain’s potential for cross-borders trades. Dr. Steve Hanke, a leading scholar in currency economics and hyperinflation, is spearheading an initiative to raise funds to benefit the people of Venezuela, which is now suffering from an annual inflation rate of over a million percent.
Dubbed “Airdrop Venezuela,” the project seeks to raise $1M in charitable donations- in cryptocurrency. Proceeds will be distributed to 100,000 Venezuelans through AirTM, a digital wallet that links blockchain assets to real-world bank accounts. The project has already raised $160,000.
Crypto Has “Great Promise”
“Over the past five years, cryptocurrency has been plagued by scams, securities fraud, and magical thinking,” Professor Hanke noted in a press release, adding: “But, cryptocurrency holds great promise as a mechanism for the direct transfer of donations to impoverished people.”
Some of this promise has already been realized over the past year, when charitable hodlers gave sizeable peer-to-peer donations of cryptocurrencies to needy Venezuelan families. Due to the nature of blockchain transactions – which have minimal fees and do not require official permission – cryptocurrency users could make donations directly to the beneficiaries, without intermediaries or middlemen.
But those beneficiaries still faced the challenge of spending their crypto, a difficult prospect in a market where merchant adoption is still minimal. By linking blockchain assets to real-world bank accounts, AirTM says it can breach one of adoption’s biggest barriers.
At present, AirTM claims over 400,000 users, although it’s not clear how many Venezuelans have access to the service. But Hanke, who has also joined AirTM’s Board of Directors, is optimistic about its chances. “Indeed,” the economist says, “Airdrop Venezuela will demonstrate that cryptocurrencies can be transformed via free-market peer-to-peer exchanges into useful money–real money to buy real things.”
Crypto “Cannot Be Stopped” By Authoritarians
But crypto’s advantages aren’t just limited to cheap transactions, and the economist emphasizes that censorship-resistance provides a large advantage over fiat in countries where local authorities do not always have public interest at heart.
“One promising use for cryptocurrency is to move value across borders in a way that cannot be stopped by authoritarian regimes,” Hanke noted. “For the millions of people in Venezuela whose lives have been destroyed by hyperinflation, direct cryptocurrency donations will be a lifesaver.”
The new initiative could burnish the credibility of the AirTM project, as well as of cryptocurrency at large. A Professor of Applied Economics at The Johns Hopkins University, Hanke is a leading specialist on hyperinflation, and served on President Reagan’s Council of Economic Advisers.
In the past, Hanke has helped several national governments develop anti-hyperinflation policies, including a role in Venezuela as chief adviser to President Rafael Caldera. Hanke’s name still bears weight in the country, through the eponymous Instituto Hanke de Economia Aplicada, based in Caracas.
The author has investments in digital assets, but none mentioned in this article.