Kelly Robertson
In an effort to circumvent U.S.-led financial sanctions, Venezuelan President Nicolas Maduro has recently announced the “Petro” cryptocurrency, backed by the country’s oil reserves.
Said sanctions, enacted this year by U.S. President Donald Trump’s administration, are hurting Venezuela’s ability to move money through international banks. They are levied against Venezuelan officials, PDVSA executives and the country’s debt issuance.
In real life, the sanctions have forced compliance departments to scrutinize transactions linked to Venezuela, which has slowed some bond payments and complicated certain oil exports.
The 21st century has arrived?
Maduro proclaimed that the “21st century has arrived,” while failing to provide any tech details of the forthcoming cryptocurrency.
“Venezuela will create a cryptocurrency,” backed by oil, gas, gold and diamond reserves, he said in his regular Sunday televised broadcast. According to Maduro, the cryptocurrency will help Venezuela “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”
Meanwhile, the country’s regular fiat currency, the Bolivar, is in freefall, and there is a lack of basic items like food and medicine.
So could a cryptocurrency succeed where fiat has failed?
The recent appreciation in value of Bitcoin may have played a role in Venezuela “going crypto,” but the move isn’t without its critics.
Opposition thinks there is no credibility behind Petro
Maduro’s government doesn’t have a good track record in monetary policy; quite the contrary it has recklessly refused to overhaul Venezuela’s controls and stem the economic meltdown.
Currency controls and excessive money printing have led to a 57 percent depreciation of the Bolivar against the dollar in the last month alone on the widely used black market. That has dragged down the monthly minimum wage to a mere $4.30. And Petro is unlikely to bring any immediate relief.
“It’s Maduro being a clown. This has no credibility,” opposition lawmaker and economist Angel Alvarado told Reuters, while his fellow opposition legislator Jose Guerra added that he sees “no future in this.”
Maduro on its end claims he is trying to combat a Washington-backed conspiracy to sabotage his government and end socialism in Latin America. He went on to add that Venezuela was facing a financial “world war.”
Cryptocurrency mining is booming in Venezuela
Tech savvy individuals in the country are already vested in cryptocurrencies, with some of them putting the virtually free electricity to good use — they mine for cryptocurrencies like there is no tomorrow.
At first, most of them were mining bitcoins, helping the market hit its record high in 2016. Later on, they turned their attention to other cryptocurrencies, including Ethereum and Dash.
But… From time to time the country’s energy company takes note of consumption surges and then the chaos begins for miners. They have been labeled as “capitalist parasites,” and some of them have been forced to change locations.
Among those mining for better life are professors and college students, with some rumors suggesting politicians and police officers did the same.
So is Maduro learning something from these folks? And could his plan succeed to circumvent sanctions? It’s hard to tell, and we can’t wait to see what will come out of all this. After all, a government-backed cryptocurrency could be the “thing” some of us have been waiting for. True, we expected an economy in better condition to be behind any such effort, but we’ll take what we can get. And keep following how this story unfolds. Stay tuned…
UPDATE: Venezuela’s Congress declares “petro” illegal
On January 9th, 2018 – Venezuela’s opposition-run parliament outlawed a “petro” cryptocurrency, calling it an effort to illegally mortgage the country’s oil reserves, Reuters is reporting.
“This is not a cryptocurrency, this is a forward sale of Venezuelan oil,” said legislator Jorge Millan. “It is tailor-made for corruption.”
Legislators warned investors that the petro would be seen as null and void once Maduro, who is up for re-election this year, is no longer in office. They added that the petro issue violates constitutional requirements that the legislature approve borrowing.
The government plans in the coming weeks to issue 100 million petros, backed by 100 million barrels of oil reserves.
UPDATE2: The first sale of the Petro will take place February 20
President Maduro announced the date at the end of January, adding that a number of “mining farms” are being developed at schools and universities.
“This is the moment to accelerate the entry of the petro, to have faith in what we’ve created and in the technological and intellectual capacity of our country,” Maduro said on state TV. “The petro will have a great impact, in how we access foreign currencies for the country and in how we obtain goods and services that we need from around the world.”
The president said more details are available on www.elpetro.gob.ve.
