It is clear that states are taking different measures in order to fight against cryptocurrencies in their territories. Venezuela, for several reasons, is one of the countries that has decided to launch its own cryptocurrency. With it, the government is trying to avoid international financial restrictions and recover control over the money supply.
Venezuela’s currency, the Bolivar, has lost more than 90% of its value in the last 15 years. The country is suffering from a deep economic crisis that has been strengthening since the death of Hugo Chavez in 2013.
Nicolás Maduro, Venezuela’s President, announced on December the 3rd that it was going to launch a cryptocurrency named ‘The Petro’. The speech given by Maduro was transmitted on the national TV Channel VTV.
President Maduro said:
“Venezuela announces the creation of its own cryptocurrency. It will be called ‘The Petro’ (…) This will let us move towards new ways of international financing in order to allow the social and economic development of the country.”
This will be the first cryptocurrency issued in Latin America once it starts circulating. The Petro will also be backed by the country’s natural reserves. Venezuela is a rich country with natural resources of gold, oil, gas and diamonds. These will form the basis for the cryptocurrency, more specifically, one Petro will be worth one Barrel of Oil.
Several experts have given their opinion about ‘the Petro.’ For example, Luis Oliveros, a recognized Venezuelan economist, wrote in his Twitter account that the cryptocurrency that the government wants to issue is not a cryptocurrency, but just a debt instrument backed by oil barrels.
An official statement released by the government reads as follows:
“The owner of the Petro would be able to change the market value of the crypto-asset for the equivalent in another cryptocurrency or in Bolívares at the official exchange rate published by the national crypto-asset exchange house. The holder of the petro will have a virtual wallet, which will be of his own responsibility, as well as the associated risks related to its use.”
The government announced on January the 23rd that the national cryptocurrency will be offered in a pre-sale in hard currency and other cryptocurrencies. The interesting fact is that the virtual currency will not initially be available to be purchased with the national collapsing currency.
Venezuelan Economic Situation
Venezuela is suffering from an potentially disastrous economic crisis. The country had the highest inflation on earth according to the International Monetary Found (IMF), reaching 2.35 thousands percent in 2017.
In addition to it, Venezuela’s GDP rate has shown a contraction of -14%. More than 80% of its population is behind the poverty line and the situation is not expected to be better. Citizens do not have access to basic medicines to treat diabetes, cancer or other minor diseases. And if this was not enough, there is a lack of toilet rolls and toothpaste.
The astronomic inflation rates have created a problem to transact money. Every single day, prices change almost every single hour. The supermarkets are not able to deal with so many bank notes and individuals have lost the possibility to have some savings.
Bitcoin and Ethereum have been used by the population in order to store value and transfer money. Many families are starting to mine cryptocurrencies at home, being Ethereum one of the favourites because it does not require ASIC hardware to be mined. But the police and the government are opposed to this. Several times, the government has sent the national guard to destroy small mining farms operatives in the country.
It will be important to see how the Petro will perform in the coming months as soon as it is launched. Will it work for its citizens or it will just be another creative way to avoid international sanctions?
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