Recently, Venezuela has found it almost impossible to make scheduled payment for $120 billion debt it owes foreign lenders and bondholders, due to the sanctions that forbids its government from using the US banking system. The President, Nicolás Maduro, of the country has now resorted to an ingenious way of raising funds for the nation; cryptocurrency.
In a televised address on 3 December 2017, Maduro stated that he plans to roll out a new digital currency called “petro” that will be different from Bitcoin and other cryptocurrencies. Petro will be backed by Venezuela’s oil, diamond, gold, and mineral reserves which will help restore the country back to its former glory, Maduro claimed. The currency will also help Venezuela escape from future US restrictions through the creation of an alternative path for transactions.
“I have ordered the emission 100 million petros with the legal support of Venezuela’s oil wealth” the South American President announced. The 100 million token are currently worth $6million at the price of 1 barrel per token. The total supply will be backed by 5 billion unearth barrels. No timeline for the launch of the currency was revealed. The establishment of a blockchain observatory to administer the Petro was also announced.
Opposition leaders expressed doubt the practicality of the digital currency considering the economic breakdown being experience in the county. Jorge Millian, an opposition legislator, has called the concept a “new act of fraud” during a debate with politicians. He was also quoted by Reuters as saying, ” This is not cryptocurrency, this is financial sale of Venezuelan oil, tailor-made for corruption”. The legislator also warn investors that the cryptocurrency will become invalid if the president should step down with presidential election due in 2018.
Acquiring the necessary affirmation from legislative to execute his plans poses no obstacle President Maduro, having successfully formed an election of special law-making body with loyalty to his agenda. However, the complexities involved in creating a blockchain and setting up mining pools is proving to be quite the challenge for the President Maduro, who us yet to come up with the exact method for calculating the currency, its value, how it will work and its total hardcap.
In the past few years, Venezuela economy has been into chaos, due to fall in global oil prices and the way which its government respond to the crisis. The real currency, the bolivar, has greatly lose its value and the country is sorely lacking in basic infrastructure, food, and medicine. Unofficial exchange rate has abruptly shoot up from 3,000 bolivars to the dollar to about 103,000 bolivars. Millions of Venezuela are living well below the poverty line, finding it difficult to eat three meals a day. The prospect of mining cryptocurrency is being viewed by many as a source of relief, considering the fact that the President will be hiring miners across the country.
Russia is reportedly considering something very similar as a means of evading U.S. sanctions, both Russia and Venezuela have strong correlations and they are two of the countries topping the list of largest oil and gas producers.