Cryptocurrencies are growing at such a rapid pace, that countries struggling with inflation are now looking to create national cryptos.
In December 2017, Venezuelan President Nicolas Maduro announced his intention to introduce a cryptocurrency to ease some of Venezuela’s money woes. Our editor, Bernd Struben explained in his article, ‘Venezuela Looks to Cryptocurrencies to Thwart US’ why Venezuela is looking to crypto:
‘If Maduro’s government can successfully launch its own crypto, it will certainly make the US-led financial sanctions trickier to monitor.
‘That’s one of the selling points of cryptos, after all.
‘They remain largely outside of the control of central and commercial banks and governments.’
And that help was desperately needed.
According to CNN, Venezuela hit 4,000% inflation in November last year. Since then, the outlook is still bleak. Oil production is still slowing, and CNN reported that malaria, infant and maternal deaths have all seen significant increases.
Excluding a strike in 2002/3, oil production is at its lowest in over 28 years. As the country’s main, if not only, source of income, it presents a frightening picture for the welfare of citizens.
Many Venezuelans turned to bitcoin back in September, when their bolivar currency was trading on black markets for around the same as the satoshi, the smallest bitcoin unit available.
So when Maduro announced his intention to introduce a cryptocurrency backed by Venezeula’s oil, it seemed like a reasonable solution.
One Forbes article slammed the decision, saying ‘the fact that Maduro sees the need to back his cryptocurrency with hard assets should immediately give potential investors pause for thought.’
The petro dilemma
But this wouldn’t be the first cryptocurrency backed by a physical asset. The UK Royal Mint have announced their intention to release RMG as a way for people to transfer actual gold ownership via crypto platforms.
And according to CNBC, while Venezuela might be the first, they may not be the only state looking at a sovereign-backed currency. Sweden, Estonia, and Singapore have all expressed interest in their own digital currency.
For Venezuelans with quickly diminishing options, it could have had real promise.
But Venezuela’s Congress has declared their petro cryptocurrency illegal.
This week, Venezuela’s opposition-run parliament has effectively outlawed the cryptocurrency, according to SBS News.
Legislator Jorge Millan argued ‘This is not a cryptocurrency, this is a forward sale of Venezuelan oil.’
Given the state of Venezuela’s political and legislative systems, the petro plans may still go ahead. But the success will most likely be marred by this statement, given that Maduro is up for re-election this year.
His party have already lost control to the opposition, so his re-election seems unlikely at this stage.
According to Reuters, Maduro is still planning on releasing 100 million petros in the coming week, pegged to the value of Venezuela’s oil. Venezuela’s oil finished 2017 valued at US$56.55.