After months of social and economic turmoil and a plummeting national currency, Venezuela’s President Nicolás Maduro announced in December his desire to launch a national cryptocurrency, the Petro. The President and the Ministry of Finance explained this move by stating the need to create a system by which financial transactions can be carried out. The Petro would be backed by the country’s oil, gold and diamond resources.
But Maduro’s vision has been nipped in the bud as the Venezuelan Parliament unanimously declared the cryptocurrency illegal and unconstitutional. Deputy Williams Dávila described Maduro’s move simply as a way “to evade financial sanctions, openly violating the Constitution and legitimizing illicit transactions.”
The President announced that over 5 billion barrels of crude oil would be assigned as a back-up for the digital currency – one barrel being estimated at $59 - but legislators are considering it a forward sale of the country’s black gold and a mischievous scheme to nurture corruption and avoid facing the current crisis. “Venezuela owes an estimated $140 billion to foreign creditors”.
Indeed, should the creation of the Petro proceed, legislators warned investors that the digital currency will have no value the day Maduro is no longer in office. But it might not even be necessary for the opposition to dismiss the cryptocurrency as the creation of any digital currency must inherently be reliable, and with the current state of affairs, it seems unlikely that investors will trust the Petro.
Venezuela has been going through a deep economic crisis that has seen its currency become nearly worthless, with inflation rates beyond 4,000%. It has caused a tragic humanitarian disaster where food is scarce – and when available, the prices are exorbitant – and medical supplies unattainable.