The supposed launch of a Venezuelan cryptocurrency is causing creditors to react, particularly the U.S. Department of Treasury who fears that President Maduro is simply seeking a way to extend the country’s credit in violation of the sanctions imposed last summer.
Indeed, two U.S. Senators have written an open letter to question how the Treasury will prevent Venezuela from avoiding sanctions. "We have serious doubts about whether Venezuela has the capacity to launch a cryptocurrency, but regardless, it is imperative that the U.S. Treasury Department is equipped with tools and enforcement mechanisms to combat the use of cryptocurrency to evade U.S. sanctions in general, and in this case in particular," write Marco Rubio (R.-Fl) and Robert Menendez (D.-NJ).
Maduro’s December announcement of his imminent launch of a national cryptocurrency – the petro – had already caused an upheaval in Parliament. Indeed, the opposition immediately declared it illegal and unconstitutional, fearing that such a scheme (should it be implemented) will only exacerbate the current economic crisis while indirectly encouraging illicit transactions.
VIBE, the advisory group created for the development of the Venezuelan cryptocurrency, recommended breaking down the issuance of the tokens into three waves: the first batch would be directed to private placements offered at a 60% discount (38.4 million petros); the second would be made available to the public (44 million petros) and the remainder is expected to be shared between the government and VIBE. The bolivar and the petro are expected to be used interchangeably and the petro will be pegged to the price of an oil barrel (estimated at $59).
The amount of tokens would be fixed and pre-mined at 100 million (and backed by the same amount of barrels of oil) and will therefore exist from the day of their launch, unlike bitcoin that is gradually mined as transactions are made.
The sale of the first tokens is expected to open on February 15th. It remains to be seen if Maduro will persevere despite lack of support from Parliament and signs of protest from the U.S. where most of the Latin American country’s lenders are located. Regardless, the petro’s only chance of survival is if its investors believe in it - because a currency cannot exist if people don’t trust it – and that sounds like a hard-to-achieve bet given the government’s unenviable financial track record.