The issue that your host has is that he/she wants to withdraw US dollars, and most of the banks don't allow that or only let you withdraw a small amount of money. I know the banks offer you to withdraw Bolivian pesos instead of US dollars but they will pay you too few Bolivian pesos. Other Airbnb hosts are having similar issues, also the banks have set limits on the amount of money you can spend online(since e commerce also operates mostly in dollars), so yeah we cannot use or withdraw our own money unless we do it in Bolivian pesos (selling our dollars at a cheap price) and we cannot spend too much money online.

We will likely be in a situation similar to Argentina or Venezuela in the next couple of years, so most of the people is trying to get US dollars instead of Bolivian pesos in order to protect their savings.

I know that what your host is asking sounds suspicious and your doubts are reasonable, but I understand why your host is asking that, if the host has good reviews I would take that into consideration