Blockchain Goes the World – Venezuela and the Petro

How can the Petro help Venezuela?

Is cryptocurrency really a miracle cure?

On 3 December, 2017, President Nicolás Maduro made the announcement in a televised address. Two months later, Venezuela launched its controversial cryptocurrency Petro. The token is based on the NEM blockchain. Supposedly, the country’s rich oil reserves, gasoline, gold, and diamonds back the token. This is the self-imposed dictator’s last ditch effort to supplement his country’s plummeting bolívar fuerte currency. However, Venezuela is entering its fifth year of political and economic crisis. Global opinion has hardened against Maduro. Therefore, it is unlikely a decentralized option to fiat will circumvent U.S. sanctions. Neither is it likely provide a means to access international financing.

Earlier this year, US President Donald Trump signed an executive order making it illegal for Americans to purchase the Petro or Petro Gold, another Venezuelan cryptocurrency issued shortly after the Petro. The order also prohibits US entities from engaging in fiat and cryptocurrency financial transactions with the country as a whole. Claims are that they directly support the dictatorship and its attempts to undermine democratic order.

Experts remain skeptical

Petro, which claims to be backed by oil, has some experts questioning its validity, since drilling has yet to commence and the government is not completely in control of its own oil-drilling operations. Russia and China own substantial stakes in Venezuela’s rich natural resources. There are several projects currently in the works. There is no agreement to the allocation of any portion of those assets to support Maduro’s new monetary system. It doesn’t help that Venezuela’s congress has publicly stated the tokens are illegal because the legislature didn’t approve the transaction or development. Says a U.S. official, “At face value, the Petro is a scam ripe for exploitation by corrupt regime insiders seeking to defraud international investors and ordinary citizens.”

Difficult times

Petro Gold is Venezuela’s gold-backed cryptocurrency introduced in February of this year, and it’s not clear whether the precious metal meant to back the tokens would actually derive from current reserves or untapped wealth. It’s Maduro’s second attempt to launch a cryptocurrency following the failure of the oil-backed Petro to perform. Blockchain experts pan it as a pipe dream. Opposition leaders call the state-backed cryptocurrency an illegal debt issue. Investors have questioned its value given concerns about the country’s economic status, solvency, and transparency.

It seems the Petro is just a way to hide new international debt behind crypto and, according to experts, the blockchain won’t save Venezuela. Venezuela’s own citizens can’t purchase Petro or Petro Gold with their own currency and foreigners can’t buy it for cash. Therefore, the sole purpose for decentralization, or no control by by any bank or government in order to empower the people, is moot.

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