Late last year, a couple of weeks before Christmas, a man in Venezuela was on his way to a barbecue when he got a phone call from the cops. The police said they had just raided his office. They demanded he hand over fifteen thousand dollars or else they would take his most valuable possession, his computers at mine bitcoin. They blasted my door and found the machines and then uh disconnected all of them and put them in vans
and then took them to their police officers. To protect his identity, we're concealing the real name of the man you just heard from for the purposes of today's show. Will call him David. David's home country, Venezuela, has been fighting one of the world's highest inflation rates. The local currency, the Believer, is now worth so little it's been used as confetti at soccer games. That's why some enterprising locals
like David started mining bitcoin. They mind bitcoin and converted it to the most precious resource in Venezuela, US dollars. Access to those U S dollars was what put a bull side on David's back. The police received a tip that David had mining equipment. That was a good indication that he had the dollars that the officers and everyone else in the country wanted. Even if you're innocent, you're still gonna spend a month or two months in prison
while everything clears out. Instead of risking jail time, David and his family through a few belongings in their suit pleases and made a dash for the Colombian border. I had cash money in my hand and and I just passed on my passport to the to the immigration officer in the in the border, and and hope for the best. Hi. I'm brat Stone and I'm Camila Russo. And this week on Decrypted, we'll see how Venezuela became an unlikely hub
for mining bitcoin. Around the world, bitcoin has been viewed as a risky investment, but for some people in Venezuela with a currency and free folk, bitcoin became a financial lifeline. When the police came for David, Bitcoin mining in Venezuela was unregulated. The police used this lack of clarity to harass and threatened miners to make them hand over their money. The Venezuelan government legalized between mining and January, but miners, I've spoken to say they're still getting her asked stay
with us. I'm from a small city and in the mid west of as well. David's hometown is vast, basic crossroads in the heart of the country. It's pretty pretty calm to grow up there because you can have a smooth family life where you can go to school and then go to go home for lunch. David says he grew up wanting to study the law and become a businessman.
He ended up doing both. When David was still a teenager, Hugo Chavez became president, but he was almost ousted in two thousands and two hundreds of thousands of people protested. It was at one of those protests that David, is still a high school student, met his wife. It was January two thousand and three, two thousand and three, when the protests were being held in Plascas. We were protesting in our city, like and we met because she was with a friend of mine from school and I was
with my cousin. After college, David and his wife lived in Europe for a few years. In twelve, they came back to Venezuela, believing the political situation was about to change. Elections were coming and David thought the opposition candidate and Brique Capriles, might win. He had many young fans who rarely behind him with cheerful campaign songs Venezuela and I thought, I my country was gonna get better and improve, and we're gonna I quit my job to start my business
in Venezuela with my wife, and we did. But Hugo Chaves one and then a year later he died, leaving Venezuela with a big national deficit, a week Bolivard and food shortages. Nicolas Maduro became the new leader, but David and Isuel were already back in Venezuela trying their best to run a radiology business, and political tensions were rising again. And then afterwards it was all the downhill because the protests were like block away from our business, or two
blocks away. President Maduro maintained the populist policies of Hugo Chavez, but a decline in the price of oil, Venezuela's main export, hit the country. Hard conditions got worse. Protests erupted again in early leaving many dead. They were happening right outside David's office. The tear gas entered to our our office every day for like the three consecutive months, so it was it was awful because people weren't working, and when they were working, if you work, you work half a
day because half a day you protested. David felt politically aligned with the protesters and would close the office from major strikes, but it started to impact this business. We as a business um supported the strike and we closed most of the day, so we had to put money from our pockets to pay for salaries during the strikes. As David's business was faltering, he discovered another way to
make money that's coming up next. By late two thousand fourteen and early two thousand fifteen, the economic situation in Venezuela was becoming critical. Now to the crisis in Venezuela which takes many forms economic, political, social, but perhaps nothing is more harmful day to day than shortages of medicine
and food. Put simply, many Venezuelans are starving to death and their government often can't or won't do anything to help the value of the boulevard was in free fall, and David was desperate for a way to protect what remained of a savings. Many people were trying to bite dollars on the black market at a very unfavorable exchange rate.
But then another option emerged, bitcoin mining. My younger brother was the one who first bought a couple of machines and like just out of curiosity, because a friend introduced him to the to this world. At first, David was skeptical. What I told my brother is I want to see you sell some currency and get us dollars for it before I risk a little dollars. I have to to buy machines or buy currency. Cautiously, David started setting up
his own mining operation. Bitcoin is run by a network of computers competing the solved complicated math problems which verify transactions on the network. That's known as mining, and computers that solve those problems get rewarded in bitcoin. It gave David a way to pay for things that we're becoming harder to afford. I bought like three or four just to to pay for like I don't know, private insurance abroad and things that you couldn't easily pay with with
the local currency. One of the largest costs and mining is the huge amount of electricity it requires, but in Venezuela power is heavily subsidized which makes cryptocurrency mining almost free. David just had to be able to buy the computers. People started buying these machines to pay for the luxuries
they couldn't afford anymore with their regular jobs. At first it was a thing like it was an activity to pay for for a luxury, and after that it became a necessity because if you didn't mind, there was no way to acquire dollars or any other currency to to purchase the food or medicine that you couldn't find. Event as well, for a while they set up work for David. His mining operations slowly grew from the three computers he started with. I wouldn't say we rushed into the business
like it was. We did it step by step and by reinvesting whatever we were earning. Eventually he had as many as twenty one computers mining bitcoin, and David could sell his bitcoin through online exchanges and get US dollars. It became his main source of income until last year. There were no regulations in Venezuela around cryptocurrency mining. It wasn't illegal, but it wasn't. It was just deregulated. So we didn't want to get it so much exposure with
the economy in Venezuela, crushing. Bitcoin miners were becoming conspicuous for the money they had access to, even if it's legal, you're basically saying that you have a factory of currencies wherever you have the machines, and you're you have a machine that produces, produces a currency that that's easily traded for US dollars, and you're doing that in a country where the minimum wage is actually like like regular workers
are earning four or five dollars a month. In fact, as of this taping, the minimum wage is now barely over a dollar a month. Yeah, and if you have a machine that produces a hundred and fifty or two hundred, you're producing what forty workers are doing in one month. David and his brother tried to keep their bitcoin mining quiet. The little machines we had, we put them into many offices we had rented or our own. But the police and military were starting the target bitcoin miners, demanding payoffs
in bitcoin or dollars. Miners who refused to cooperate might be charged with petty crimes or have their minds stolen. In addition to David, I've spoken to three other miners in Venezuela who say they went through something similar, who always knew that in Venezuela you don't need to you don't need to be guilty or be committing a crime to go to prison, so you always had to take your precautions. Then last year the suppliers were Davide Ideology
Office started having trouble procurring U S dollars. That meant they couldn't input materials from overseas. David says he was barely able to continue running his business onto US and seventeenth everything stopped completely. Like we we didn't read stock materials. We haven'try stark materials for more than a year and a half. You can say we held on for five years until we decided it was no longer profitable to
keep it open with the hyperinflation that's currently there. As of last year, President Nicolas Maduro was so strapped for cash he stopped paying back international creditors and buying imports to stock hospitals and supermarket shelves. In early December, Maludo announced plans to issue the country's own cryptocurrency as a way of raising funds. The news came during a boom in bitcoin prices pet But despite the new seemingly crypto friendly climate, I've spoken to miners who say the police
have continued to harass them. As soon as my Lutta started talking all cryptocurrencies. A couple of weeks later, all the cops in in town were hunting for the machines, like patrolling at night, trying to listen for the noise. And by the way, what David referring to here is
the humming of the computers as a mine. Cryptocurrencies. Miners are also discovered because the high electricity consumption attracted attention because they knew the machine produced money, and they knew that taking away the machines from you would make you pay them a ransom. Camilla. It sounds really frightening, but I guess the police are just as desperate as everybody else for money that can retain its value. Yes, definitely.
And then less than a month after President A. Lutta went on TV to talk about the Petro at tenant in David's office building, the same building where David had his bitcoin mind had a run in with the police. My neighbor he sold or he exported plastic chairs or
something to Panama and to Colombia. And he also I think what I heard from police sources was that he was he was storing like four tons of sugar, which in Venezuela is also a crime, and he got a rate and and they threatened to throw him in jail for many years. Remember, Venezuela is dealing with the chronic shortage of supplies, so the government established tight controls to
stop people from stockpiling essentials. Faced with the prospect of going to jail, David says his neighbor snitched on him. He ratted me out because he had heard the noise of the machines at some point. So he told the police that he that that he would deliver a bigger fish, so if they were lenient on his case. They blasted my door, a door that communicated both both of our places, and found the machines and then uh disconnected all of them and put them in vans and then took them
to their police officers. I wasn't there, was actually far away from the office, but they they called me and they told him me they wanted fifteen thou dollars to not give it to the prosecutor's office. Keep in mind, dollars is an enormous amount of money. In Venezuela, the currency is almost worthless now. An ordinary person might live off two d dollars from a month or two. They also downloaded all of the pictures of my family that they had on the that I had on the computer
that wasn't at the place. That night they called me to say that they had pictures of my family and that they knew where I went to school, what I did, and where I had all my businesses, so um that if I didn't deliver the fifteen in cash I they would go making raids in all of the places. The very same night, as a police rate, David decided to escape with his family. I think I was home, and I packed my bags and headed for the Colombian border because I had two small suns, so I just didn't
want to take any chances. We just managed to put like the medicines for the kids and and whatever like was urgent for them. And I don't know the clothes we had on at firsthand, but we left pretty much everything and we just took whatever I fit in, like three three bags. Under cover of night, David and his family crossed into Colombia. From there, they flew to the US and made their way to Europe. President Maduro legalized bitcoin mining in late January, just weeks after David and
his family fled the country. Miners kind of register through an official website to get authorization, but miners I've spoken to are worry about going through that process. They don't trust the authorities. The rules aren't clear, but they always hang on to something. They say that you haven't paid for your import duties, and if you paid for your import duties, then they say you're exceeding the electricity assignment
that you were given. And if and if it's not that, they will say, uh, you are money laundering because you you cannot prove where you're using the money, or where the money came, or where the money is going. And by the way, we tried contacting the Superintendency of Cryptocurrencies in Venezuela to ask about these reports of bitcoin miners getting harassed, but we never heard back. Venezuela issued the Petro in February, and President Maduro claims it's raised five
billion dollars from countries including China and Russia. That would make it the largest initial coin offering ever. The president said the Petro, which is meant to be backed by oil reserves, must become legal tender for all transactions involving government institutions, but few, if any exchanges outside of Venezuela have listed the Petro. US President Donald Trump banned all transactions with the Petro, so it's hard to say what
demand has been like. Demand for bitcoin in Venezuela, on the other hand, continues to soar daily transactions climbed to a record one million dollars recently, although David thinks it won't be viable to mind cryptocurrency in Venezuela for much longer. The power supply in Venezuela has become increasingly unstable. Even the people who work at maintenance at the corporatelect that is,
the national UH Electricity company. They're all migrating also, And when when when the technicians, everyone, everyone capable leaves UH, the electrical grid will decline. So, Cammilla, do you have any sympathy for the government's position here because they are subsidizing electricity use and here are the bitcoin miners taking
advantage of that. I think it's easy to have sympathy here for everyone involved, since in the end, everyone is being affected by this enormous economic crisis that Venezuela is going through. But still, I think the real victims here are bitcoin miners. I mean they were able to find a way to get by in a country that's basically it's become really hard to live in um and that's because of the government's own actions. So yeah, I think the victims here are the bitcoin miners, right, and here
they are now getting harassed by authorities. What are the worst stories you've heard in terms of miners encounters with police. Well, besides David's story, which is pretty dramatic, you know, he had to just leave the country, leave everything he owned behind. I talked to one miner who had to spend a couple of nights in jail, got beat up by the cops.
I know another miner who was threatened, was physically threatened by by the police, and just you know, other stories of people living in permanent paranoia, you know, feeling that they're being followed, not knowing where whereon when the police and the military might show up. The situation in Venezuela is is clearly unique. But do you think there are any lessons for other members of the bitcoin community or
other miners around the world and what's happened here. Yes, I think this is an extreme case, but it does speak to the lack of regulation that there is in the broader cryptocurrency and bitcoin mining community around the world. I mean, there isn't a clear regulation everywhere. We've seen in other countries that have become large hubs for cryptocurrency mining, such in China, where you know, officials and authorities you know,
decided to crack down on bitcoin miners. Miners had to move elsewhere, So you get this kind of unstable environment and regulatory framework everywhere in the world. Right Yeah, miners are drawing on this public resource electricity, and as bitcoin mining requires more of it, it does make sense that governments around the world will have to react. Calla tell us what David is up to right now and how it's doing today. David is in Europe building new life.
He's still able to practice law and hopes to get a job with a legal firm. Until then, he's acting as a translator for Venezuelans applying for visas to leave the country. His wife is registering as a dentist so she can start practicing, and his two kids are adjusting to their new life. David hopes that one day he'll be able to return to Venezuela, but he thinks it will take years for the economy to recover. And I hear there's one thing that hasn't changed. David's still in
the business of cryptocurrency mining. I do, I have. I have some machines in Canada. It's not as profitable as in Venezuela because we pay for electricity pretty much. It's cheaper than than most of places, but it's it's still a big chunk of the of the mining operation. The plans were always there. We just rushed them when everything happened in Venezuela, like we were going to do it. Uh just not just for the for the legal or
not legal environment, but because like the electricity is way stabler. Wait, it's way more stable and um and you you don't have to be worried that if if the machines are going to still be there when you wake up. And that's it for this week's Decrypted. Thanks for listening. Let us know what you thought of today's show. You can email us at Decrypted at Bloomberg dot net or reach out to me on Twitter. I'm at Kami Uso and
I'm at brad Stone. If you haven't already, subscribe to our show wherever you get your podcast and gave us a rating and a review. They really help us reach new listeners. This episode was produced by Pia ga Pari, Magnus Henrickson and Listening. Francesca Leivi is the head of Bloomberg Podcast. We'll see you next week.