Venezuela Launches New Cryptocurrency

Venezuela’s President Nicolas Maduro announced the launch of a new oil-backed cryptocurrency, known as the ‘Petro’, on 20 February 2018. The cryptocurrency is said to be an attempt to stabilize Venezuela’s struggling economy by increasing cash flow, with official sales of the cryptocurrency beginning on 23 March. Since Maduro’s announcement, the Petro has been released for pre-sale and has raised close to £527million ($735 million) in its first week alone. As of 10 March, Maduro claims the Petro has now generated $5 billion dollars during its pre-sale period, with reports of over 83,000 people from 123 countries having purchased the cryptocurrency. The figures provided by the Venezuelan government have been widely criticised across the globe, with claims they are nothing more than a farce due to no firm evidence to support the claims being provided. With mistrusted in the Maduro government at an all-time high, it is no wonder questions regarding the credibility of these claims are appearing. Off the back of the success of the Petro, the Venezuelan government have stated they are planning to prepare a second digital currency that would be known as ‘petro oro’. This second cryptocurrency they say will be backed by gold and other precious metals but little more has been said regarding the matter.

President Maduro announced in a televised speech 22 March that official sales of the Petro are to begin on 23 March, and that ” all citizens and companies will be able to purchase ‘petros’ on a specialized website with yuans, rubles, Turkish liras, and euros, as well as with cryptocurrencies such as bitcoin, etherium and NEM,”. There were originally doubts as to whether common Venezuelans would be able to access the Petro, but given one Petro is priced based-on the cost of a barrel of oil which runs at $60 (6.4 million Bolivars as of December 2017), it is doubtful they could afford to do so despite being granted access.

The Petro has been widely perceived as being an attempt to get around the sanctions placed on Venezuela by the United States and the European Union, and if this is the case they have sadly failed. The Trump administration on 19 March announced a block on the cryptocurrency after issuing an executive order to ban the purchase of the Petro in the US. Within Tump’s letter to congress regarding the ban, he says “the Executive Order prohibits, as of its effective date, all transactions related to, provision of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018.”

The Trump Administration is not the only issue that Maduro is facing. On 7 March, Venezuela’s Asamblea Nacional (National Assembly) declared it believes the Petro cryptocurrency is unconstitutional. Furthermore, the cryptocurrency has been opposed by opposition legislators with them saying the sales of the Petro are essentially issuing oil-backed debt, something that legally speaking cannot be done without approval from legislators. They argue that should Maduro fall out of power in the countries upcoming elections, or for any other reason, his successor would have full power to refuse to honor any sales of the cryptocurrency. It appears, however, that this has done nothing more than fall on deaf ears.