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Venezuelan President Announces Oil-Backed Cryptocurrency “Petro” to Combat ‘US Blockade’

Last Updated March 4, 2021 5:02 PM
Francisco Memoria
Last Updated March 4, 2021 5:02 PM

According to Reuters , Venezuelan president Nicolas Maduro recently announced a new cryptocurrency during a Christmas television special, amid the country’s economic crisis and the plunge of the Venezuelan Bolivar’s value.

Maduro, a former bus driver and union leader who took office in 2013, didn’t reveal a lot about the yet to be launched cryptocurrency named “Petro,” or how the country would go by developing and distributing it but did proclaim “the 21st century has arrived!”

During the broadcast, Maduro revealed that the cryptocurrency will be backed by commodity reserves including oil, diamonds, and gold. Per the Venezuelan leader the petro will help Venezuela overcome the country’s financial “blockade.” A statement published on the government’s website reads (rough translation):

“Venezuela will create a…cryptocurrency to advance monetary sovereignty, as it will help to overcome the financial blockade and thus move towards new forms of international financing for the economic and social development of the country.”

The announcement shows how sanctions enacted by U.S. President Donald Trump’s administration this year hurt the country’s ability to move money through the international banking system. Venezuela, as covered by CCN.com, has been ravaged by economic problems caused by hyperinflation and government failures.

The country is currently lacking basic needs like food and medicine, and its currency, the bolivar, is in freefall as it went down 57 percent last month alone on black markets due to currency controls and excessive money printing. This led the monthly minimum wage in the country down to a mere $4.3.

Reuters reports that compliance departments are scrutinizing transactions linked to Venezuela, which is in turn slowing down bond payments and thwarting oil exports. As covered by CCN.com, the country’s problems forced a lot of people in the country to depend on bitcoin and other cryptocurrencies to survive, as neither Western Union nor PayPal work there.

The Petro May Not Bring People Immediate Relief

Maduro’s pivot away from the U.S. dollar comes at a time in which bitcoin’s popularity surges as it reached a new all-time high above $11,800. However, opposition leaders in Venezuela aren’t convinced it’ll solve the country’s problems, as they say the petro needs congressional approval, and some have cast doubt on whether it will ever see the light of day, taking into account the country’s situation.

The government’s poor policies forced millions of Venezuelans to struggle for survival, as three meals a day aren’t a given. The commodity-backed cryptocurrency, the petro, is unlikely to bring them any immediate relief.

Also read: Opinion: Venezuela Proves Bitcoin is the Future of Money

Economists and opposition leaders say Maduro has refused to overhaul Venezuela’s controls that worsened the economic crisis, and point out he may now be seeking to pay foreign creditors in the cryptocurrency and plan to restructure the country’s major debt burden – a plan that they believe will likely flop.

As Andreas Antonopoulos put it:

Maduro views it as a fight against a Washington-backed conspiracy to sabotage his government and put an end to socialism in Latin America, and went as far as declaring a financial “world war.”

Cryptocurrencies in Venezuela

As mentioned above, cryptocurrencies are helping the people of Venezuela circumvent the government’s restrictions. With bitcoin and dash, for example, it’s possible to buy gift cards and use them on online marketplaces like Amazon to buy goods from abroad.

The former president of the Venezuelan Federation of Chambers of Commerce (FEDECAMARAS), Noel Alvarez, has in the past stated that a maximum of one percent of the country’s population has access to cryptocurrencies. Adoption hasn’t yet skyrocketed as the government hasn’t been gentle with cryptocurrency enthusiasts in the past, and crime is relatively common in the country.

In the past, authorities have attempted to suppress bitcoiners in the country, as its state-owned internet service provider, CANTV, blocked bitcoin-related websites and mining pools, while the country’s biggest cryptocurrency exchange SurBitcoin was forced to temporarily shut down operations after Banesco bank closed its account.

Cryptocurrency mining became an important income source in the country, but as reported by CCN.com Venezuela has been cracking down on it, as police are targeting those suspect of using too much electricity.

Featured image from Shutterstock.