Venezuela Confirms Plan to Create Petro Cryptocurrency to Circumvent US Sanctions

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Faced with an unprecedented economic crisis, Venezuela recently announced the creation of a cryptocurrency named the petro. It will have the value of a barrel of oil, said President Nicolas Maduro.

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Venezuelan Bolivar Bills/CC

The bolivar is in freefall, long live the petro! Venezuela is struggling with a currency in free fall, rampant inflation and an unprecedented economic crisis. But, President Nicolas Maduro might have found the answer. Mr. Maduro confirmed his plan on Thursday to create a cryptocurrency: the Petro. It will have the value of a barrel of oil, said Maduro on Wednesday, December 27.

According to his plans, this cryptocurrency will be backed by the fields of the Orinoco, and more specifically by a deposit containing reserves of 5 billion barrels of crude “internationally certified”.

Mr. Maduro’s are quite intriguing since Venezuela has been often criticized for its poor performance in monetary matters. The bolivar sails today between three different exchange rates. In November alone, the immoderate printing of money, the shortage of dollars and capital controls drove down its value by nearly 60% on the black market. Inflation, meanwhile, has exceeded 1,000% in 2017, according to the International Monetary Fund.

Maduro’s plan seems to emanate from the recent success of another cryptocurrency: the bitcoin. Bitcoin has been quite successful in Venezuela given its anti-inflationary virtues. But the developpers of virtual currencies, attached to their independence vis-à-vis governments and central banks, are unlikely to adhere to the plan of Caracas.

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The Venezuelan government, however, is strongly defending a project that is supposed to enable it to fight against the financial blockade of the United States. On the verge of default, the country is struggling against the financial sanctions imposed by Washington in the summer. In the event of bankruptcy, the country risks the seizure of its assets denominated in dollars.

 The opposition however has no kind words for the president and his plan. “It gives the impression that Maduro is a clown,” said MP and economist Angel Alvarado in early December. “All this has no credibility. ”

In the meantime, the vagueness remains on the launch date and even more on the operating mechanism that would make it possible to carry out transactions in petro. Only he future can tell. 

Shakes Gilles

Editor of The Talking Democrat. He enjoys bike riding, kayaking and playing soccer. On a slow weekend, you'll find him with a book by the lake.