A Closer Look at How and Why Bitcoin is Traded P2P in Russia and Venezuela

Localbitcoins saw a roughly 85 percent increase in global volume over the course of 2016, and the growth seen by this bitcoin trading platform was seen equally in both the developed and developing world—albeit for different reasons.

While the need for increased privacy and the avoidance of Know Your Customer regulations is known to be the driving force behind Localbitcoins and other forms of P2P trading volume in the developed world, much less is known about Localbitcoins’s popularity in places like Russia and Venezuela. To get a better idea of why Localbitcoins saw so much growth in these two particular areas of the world, Bitcoin.com reached out to bitcoin users on the ground who are familiar with the activities in these particular countries.

Also read: Following the PBOC Exchange Shakeup China’s Localbitcoins Volume Surges

Localbitcoins in Venezuela

Venezuela saw greater growth in Localbitcoins trading volume than any other country in the world in 2016. Although there were only around 25 bitcoins traded per week via Localbitcoins in Venezuela at the beginning of 2016, there were ten times that amount being traded per week by the end of the year. This number is even more impressive when considering the fact that the bitcoin price more than doubled during the year, which means growth was 900 percent in US dollar terms.

Although there were many people using Surbitcoin to trade bitcoin in Venezuela earlier in 2016, that exchange’s numbers declined after identities of traders were leaked. “The big driver was the intelligence service SEBIN that doubled down on some of Surbitcoin’s employees,” an anonymous member of the Venezuelan bitcoin community told Bitcoin.com. “I know of a close acquittance that got the shackles because he was mining.”

According to sources within the country, SEBIN, which is basically Venezuela’s secret police, has been targeting bitcoin users and miners, including Surbitcoin employees, and threatening them with jail time if they do not pay bribes.

Although Surbitcoin’s volume numbers were still greater than the visible alternatives at the end of the year, the exchange recently had their bank account revoked, which has led to a spike in trading on Localbitcoins and other P2P options.

In addition to Localbitcoins, a lot of trading activity also takes place via Facebook, Telegram, and amongst friends. Since cash is basically non-existent in Venezuela at this time, most of these trades happen by way of bank transfers.

Although it may seem unwise to make these sorts of trades via trackable bank transfers, a source in Venezuela claims the amount of legal commerce conducted via bank transfers makes this financial transparency a non-issue. “Heck, I even buy weed with bank transfers,” claimed the anonymous source.

Of course, many Venezuelans would prefer to get paid directly in bitcoin rather than having to exchange bolivars for it. Bitcoin mining is a popular way to earn some bitcoin in Venezuela due to government subsidization of electricity, but some Venezuelans also try to find traditional work for bitcoin on websites such as XBTFreelancer.

In terms of why Venezuelans prefer bitcoin over physical US dollars, which can be found on the black market, an anonymous source in Venezuela claimed, “At least from my perspective, bitcoin is easier to use online and it has the possibility to go up. Cash USD won’t work for both scenarios.”

Localbitcoins in Russia

Russia has more trading volume than any other country on Localbitcoins, besides the United States. According to bitcoincharts.com, Localbitcoins is the most popular option for buying and selling bitcoins in Russia, but Blockchair Lead Developer Nikita Zhavoronkov says those numbers can be misleading.

“Localbitcoins is not the only popular way to trade bitcoins in Russia, as there’s also off-line trading involving redeemable BTC-e codes, which anyone can redeem on the exchange,” Zhavoronkov told Bitcoin.com. “It’s hard to say which of these ways is more popular. So many people simply put bitcoins on BTC-e, create a code, and sell the code itself.”

According to Zhavoronkov, the advantage of selling the BTC-e codes instead of actual bitcoins is that the codes do not require traders to wait for confirmations on the blockchain. Instead, the code can be given to the buyer to be redeemed on the site, which speeds up the trading process.

In most cases, trades for BTC-e codes are made via Yandex, Qiwi, Payeer, or physical cash. According to Zhavoronkov, the local online payment systems tend to have lower identity requirements than bank transfers.

Many Russians trade via the BTC/USD pair on BTC-e because that trading pair has more liquidity. BTC-e volume numbers are not entirely accurate because of the exclusion of trades involving BTC-e codes. According to Zhavoronkov, the trading of these codes is so popular in Russia that there is even a market between USD BTC-e codes and USD cash.

An interesting aspect of the popularity of Localbitcoins in Russia is that it has been banned by The Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications. This means those visiting the website from Russia have to use a VPN or Tor.

Even with this attempt to block access to Localbitcoins, over $20 million worth of bitcoin has been traded for rubles on the platform in the past 30 days.

In addition to Localbitcoins, Zhavoronkov says much of the P2P trading activity in Russia is coordinated via Bitcointalk.org and other Russian forums. Bitcoin exchange Exmo is another means of trading the digital asset in Russia—albeit in a more centralized manner.

According to Zhavoronkov, Russians use bitcoin for reasons similar to people in other countries around the world. Some simply use it as a store of value, while others use it to gain access to darknet markets and ICO (initial coin offering) schemes. In other words, it’s difficult to find a place where someone can actually spend their bitcoin in Russia.

In terms of laws and regulations regarding bitcoin in Russia, it seems that area is still evolving. “It’s just like with China—our officials can’t decide what they want,” said Zhavoronkov.

Do you use Localbitcoins? If so, why? Let us know in the comments below.

Images via Shutterstock, and Pixabay. 

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