The oil-rich but cash poor South American country is trying to emit its own cryptocurrency to bounce back from a prolonged economic decline.
Venezuela, home to around 31 million people, has become a nation where sometimes life is better in jail compared to every day freedom, as the overall economic decline seen by its citizens makes conditions in prison a positive mirage. Better food, relative safety – and fortnightly visits from girlfriends, are key advantages nowadays.
With all the crypto hype and blockchain enthusiasm, president Maduro has decided to ride the wave and issue the “petro” coin, that will leverage the country’s vast oil reserves as a currency.
“All the cryptocurrencies of the world have been revalued after Venezuela’s announcements about the creation of the petro,”.
said Maduro in a speech broadcast on state television.
Despite having some of the largest proven oil reserves in the world, the country is in a deep economic decline due to low oil prices in the last years.
Following the fall in oil prices (a barrel of oil is currently trading at around US$66), the government was not capable to continue subsidizing its citizens through public initiatives, such as free electricity.
According the government’s declarations, the crypto sale should generate nearly $6 billion, being backed by the country’s large oil reserves.
President Madurostated: “I have ordered the emission of 100 million petros with the legal sustenance of Venezuela’s certified and legalized oil wealth. Every petro will be equal in value to Venezuela’s oil barrel.”
However, the plan has encountered immediate resistance both from the international community and investors.
The country’s opposition-run parliament declared that ‘petro’ is “illegal” and that it would be effectively calling it an effort to illegally mortgage the country’s oil reserves.
Gallegos, a Colombia-based author who recently wrote a detailed account of Venezuela’s mismanagement of its oil wealth called “Crude Nation”, declared for CNBC:
Petros could become a vehicle that could be used to secretly move cash out of a collapsing economy, and convert it into foreign currency. It will become a money laundering tool for well-connected people with.