With the rising popularity of cryptocurrency and the fame and richness attached to it, it’s no wonder that people would be cashing in on different ideas to make a dent on the cryptocurrency market and exploit some of the promised riches.
One such example comes surprisingly not from an individual or company, rather a country, Venezuela, which is beginning an operational centralized bank dealing in cryptocurrencies, as well as the launch of ‘Petro’, its own (oil-backed) cryptocurrency.
Cryptocurrency is a digital currency used as a medium of exchange. The birth of successful crypto-currency began in 2009 by an anonymous programmer, under the alias of Satoshi Nakamoto, after the release of bitcoins, and since then, the age of crypto-currency has flourished. The National Constituent Assembly of Venezuela is preparing to pass a bill and change its countries constituent to accommodate crypto assets and form its first centralized bank, with all the functions of a normal bank, including but not limited to overseeing exchange, monetary and financial policy.
The Venezuela crisis:
With US sanctions and increasing inflation (13,000 % inflation rate last year alone), Venezuela is going through one of the worst economic crisis in history. Hence, in an attempt to save its country from the depths of a dying economy, in February 2018, President Nicolas Maduro announced the launch of petro cryptocurrency and a centralized bank for it. Escurra, one of the most influential assembly member of Venezuela, said,
“The reforms being introduced are expected to include Petro (about the constituent reforms), a crypto-currency announced by President Maduro in February as a way to increase the country’s foreign exchange, economy and earning, in the middle of the economic crisis and US sanctions “.
The red flags:
- According to Maduro, early sales of the currency have reached $3.3 Billion(although limited evidence has been given about the validity of these sales).
- However, in June, the country’s superintendent of crypto-currency was replaced, as it was said that he wasn’t able to promote and sell the crypto-currency well enough, due to which the expected goal of $5billion wasn’t reached.
- On July 25, the country also announced the release of a new currency, Bolivar Soberano that will be linked with Petro. It was supposed to be released on 20th August.
The challenges ahead:
Although Venezuela had hoped to increase its foreign economy and profit, and bypass sanctions by the introduction of crypto-currency, the US treasury department has announced that buying Petros (or any affiliated currency), a currency seen as an extension of the Venezuelan government, would lead to violation of US sanctions (and might expose U.S citizens to legal risk ).
The country’s most notable attempt to boost its economy and sell the idea of their cryptocurrency was when it offered India a 30% discount on their oil purchases, on the condition that they deal in Petros, yet India declined the offer. With Venezuela still, far from exiting this crisis, it will undoubtedly be interesting to see what other solutions Venezuela may try.