Another Bitcoin Firm Turns Its Back on Venezuela

Bitcoin is often thought to be borderless and censorship-resistant, but the same doesn’t necessarily apply to the companies that provide Bitcoin services. And this is becoming increasingly evident in the embattled South American nation of Venezuela.

A growing number of cryptocurrency service providers are choosing to no longer operate in Venezuela, some of which explicitly citing the economic sanctions imposed by the US government.

The latest project to join the list of businesses leaving Venezuela is Xapo, one of the world's most popular Bitcoin wallets and cold storage service providers.

Last week, Xapo users in Venezuela began receiving emails from the company informing them about its decision to shut down support for users inside the country, urging these users to withdraw their funds within the next two months.

“We’re making some significant changes to how Xapo works,” the email began. “We’ll soon be launching a regulated digital banking platform, meaning that we’re replacing our existing product. Unfortunately, we can no longer service your country with this transition.”

Xapo did not elaborate on the specifics within its email, nor did it mention US sanctions are the determining factor, though it’s possible that the firm felt compelled to end its service in Venezuela in order to comply with US banking laws. Xapo did not return Decrypt’s request for comment.

But if it did come down to choosing between offering Bitcoin custody services to Venezuelans or expanding its business as a digital bank (which the company has been working on since March), the choice would have been fairly easy.

Either way, Xapo joins a growing list of Bitcoin service operators that have recently turned their backs on Venezuela. A little less than two months ago, Paxful, the second-largest peer-to-peer Bitcoin exchange, similarly closed up shop in the country. The company said it became too risky to offer its services to Venezuelans while being regulated in the US.

"Due to concerns about the regulatory landscape around Venezuela and Paxful's own risk tolerance, we regret to inform that Paxful will cease operations in Venezuela," the platform said in a statement shared with Decrypt, "We did our best for several months, but with the current risks, we had no choice but to make this incredibly difficult decision.

Payoneer, Transferwise, and Zelle, which offers payment services for Wells Fargo customers, have also ceased operations in Venezuela within the last year.

But none of them had the footprint in Venezuela’s crypto scene that Xapo did.

Xapo was a pioneer in the Venezuelan cryptocurrency market. In 2016, the company began to offer its service to buy and sell Bitcoin with bolivars via trusted third parties, becoming a popular option the following year along with leading Bitcoin P2P exchange LocalBitcoins and the now-defunct Surbitcoin.

But for the Venezuelan users who came to rely on Xapo, it’s time to start looking elsewhere—and fast. Clients in Venezuela have until December 31, 2020, to withdraw their Bitcoin.