GiveCrypto Monthly Update — April 2020: Preliminary Impact Data, Crypto Remittances and Emigration Loan Update
By: Joe Waltman
Tags: Venezuela, Charity, Cryptocurrency, Localbitcoins, Bitcoin

We are five weeks into our Randomized Controlled Trial, which we are calling phase 4 of the Venezuelan Ambassador Program. So far we have transferred $56,500 to over 1,100 families. We recently ran our second impact survey asking recipients about key impact metrics like food security and psychological well-being. Below is some interim data that shows baseline vs. current answers for the control, cash and crypto arms. Note that these results are preliminary (907 out of 1019 recipients have responded as of 5/1/20) and only represent five weeks of program activity. As we continue to collect data, we will have a much better picture of the program’s overall impact.

Percentage of respondents where someone from the respondent’s household went a day without eating in the 30 days prior to the survey.

Percentage of respondents that answered “extremely worried” or “often worried” when asked how stressed they were about having enough money for food in the 30 days prior to the survey (other options include: “sometimes worried”, “rarely worried”, and “never worried”).

When the survey collection is complete, this impact data will be available on our website along with the demographic and spend data for all phase 4 participants.

Crypto Remittances

Remittances are an important — and by some accounts the most important — form of direct cash transfers. The World Bank estimates that $550b in remittances were sent in 2019. This is 3x the size of ODA (Official Development Assistance) and exceeded FDI (Foreign Direct Investment) for the first time ever in 2019.

Most of this money is being sent by migrant workers back to their countries of origin. The cost of remittances can exceed 20% and averages about 7%. This means that in 2019, about $40b of remittances didn’t make it to their destination and were captured by financial service providers as fees.

We recently discovered this interesting article by Matt Ahlborg. Matt compared normal activity on localbitcoins to the activity that was seen during Venezuela’s power outage in March of 2019. As would be expected, localbitcoins activity in Venezuela dropped significantly during the outage. He then looked at localbitcoins activity in countries that have a significant number of Venezuelan migrants; Colombia, Peru, Chile, Argentina, Mexico and the USA. Activity on localbitcoins in all of these countries also dropped during the power outage. This suggests that people are using bitcoin to make remittances back to Venezuela. This makes intuitive sense as Venezuela has imposed strict currency controls, making it difficult to use traditional methods to send money.

Matt spoke with some of the money exchangers in Venezuela, who are a critical component of this remittance flow. They said that they are doing a lot of volume with likely remitters and admitted that localbitcoins is a relatively small channel for them. The majority of their volume comes from WhatsApp, Telegram and Facebook Groups, which suggests that a good amount of remittances flowing into Venezuela are utilizing crypto.

This made us wonder if there is an opportunity to build a lower cost, user friendly and crypto-native service to send money to Venezuela. Thanks to the infrastructure we built for the cash arm of the RCT, we already have the ability to convert crypto into bolivars and deposit them into a Venezuelan bank account. We just need to create a front end that allows the sender to give us crypto and specify recipient bank details.

We believe that a web3 app is the best way to get something quickly launched and are currently finalizing the initial version of the service. If you would like to see what we have in mind, here is a link to a prototype. You will need to open the link in a web3 enabled browser (i.e. Coinbase Wallet or a desktop browser with Metamask).

Postponing Emigration Loans

We launched an emigration loan program at the end of 2019. The basic idea is to give USDC loans to Venezuelans so they can move to another country and find higher paying work. The loan covers the cost of transportation and three months of room and board in the new country. If they pay back the loan, they can choose who receives the next loan.

Destinations of our first 12 emigration loan recipients

We funded twelve of these loans in 2019 and 2020. Most of the recipients traveled in late February or early March. Although a few of them had already found jobs, most of them were still searching when COVID-19 quarantines were imposed. Needless to say, it has become very difficult for them to find and/or maintain a job.

We have decided to pause any new emigration loans and relax the terms of the previous loans. We are not expecting any recipients to repay the loans until their new country’s quarantine has been lifted.

We are still very excited about the potential impact of this program and look forward to re-starting it when things return to some semblance of normalcy.

Staying Connected

As always, we love to hear from our donors and supporters outside of our updates and events. Please follow along on Twitter and our blog for updates on our programs.