Guess it is time for the Venezuelan government to consider alternative currencies like Bitcoin for foreign transactions. The possibility has arisen after the international banking major responsible for facilitating foreign transactions for the government decided to shut down all the concerned accounts in the next thirty days.
Citibank NA, the New York-based banking institution has been playing a key role as the only bank handling all the foreign transactions amidst strict currency controls implemented by the government since the past 13 years. The bank has stated that the risk management assessments conducted by the institution to be the reason behind its decision to close the accounts used by the Central Bank of Venezuela.
The Citibank’s decision comes at the time when the country’s economy is in a meltdown. By preventing the Venezuelan Central Bank from making foreign transactions, Citibank will be further exacerbating the situation as it will effective prevent the nation from making transactions with its foreign trade partners. As expected, Citi’s decision hasn’t gone down well with the government and the President of Venezuela has labelled it as a financial boycott by vested interests, blaming the United States.
The current situation in Venezuela has further exhibited the vulnerabilities of the conventional centralized financial systems. With each country having their own financial systems, the banks acts as trusted third parties who facilitate transfer and inter-conversion of funds between different monetary systems. These banks have the power to control the flow of funds, in cases like these they can easily bring down a country’s economy to its knees causing lots of trouble and hardships to the citizens of the affected nation.
Bitcoin, being a decentralized currency makes it virtually impossible for any third party to control the flow of funds between two parties irrespective of whether they are individuals or nations. This incident can serve as a reference for the governments when it comes to bitcoin regulations. By providing a clear legal status for the digital currency they can ensure that they are never financially isolated at any time.