For almost two years , Venezuela has been facing an
economic crisis that seems to be getting worse and worse. The desperation it has
caused ordinary citizens, is chief among a variety factors that led to several
periods of large scale and often violent protests in the country. The Bolivar,
(Venezuelan currency) has depreciated about 57% against the dollar in the last
month alone. Consequently the national monthly minimum wage has fallen to about
$4.30, leaving many struggling for food and other basic necessities.
Bitcoin is illegal in Venezuela, however due to increasing
hyperinflation it has become a common means to survival for those who are able
to navigate it, allowing the opportunity to buy dollars or goods online. Due to
its illegality the police have been making extra efforts to enforce laws
against bitcoin as its usage increases in the country.
Interestingly on
December 3 President Nicolas Maduro announced that in response to sanctions
imposed by the Trump administration, his regime would be launching the “Petro”
Venezuela’s very own cryptocurrency which would be backed by oil, gold, gas and
diamond reserves. He stated “I have
thoroughly studied this issue, and I want to announce that Venezuela is going
to roll out a new cryptocurrency system based on its oil reserves. Venezuela
will create a cryptocurrency —a petrocurrency, the Petro. He added “This will
allow us to reach new means of international credit for the country’s economic
and social development.” The response from his base was loud cheers, applause
and claims that the 21st century had arrived in Venezuela.
His critics however are not so optimistic, raising concerns
about how a crypto currency could be backed by oil reserves if they could not
be transferred? Many voicing concern over how a cryptocurrency could be successful
despite the country being in default on its loans, in hyperinflation and its
oil industry being bankrupt. Furthermore these sanctions issued by the United
States and the European Union refusing their citizens and firms from trading
with entities associated with the regime are to some extent responsible for the
crisis. How then can the Maduro regime expect to convince foreign investors to
accept the use of the Petro in their business dealings, if they are to ever get
as far as having business dealings at all?
https://www.cnbc.com/2017/12/03/venezuela-is-launching-a-cryptocurrency-backed-by-oil-gas-gold-and-diamonds.html
I find it interesting that they consider the Petro a cryptocurrency specifically. While the rationale behind having a digital currency to restore consumer confidence has precedence for success (i.e. Brazil), it's interesting that the Petro is going to be backed. That makes me wonder if being backed by natural resources will somehow sway its success one way or another.
ReplyDeleteIn my humble opinion, I think that whatever they are doing, they are doing for their own benefit and not citizen's benefits. At the end of the day what is going on in Venezuela is because of the corruption from the government. Government is getting richer and richer, but not the citizens and the people. This ne cryptocurrency is a new method for politicians to get more money, an excuse to keep on stealing money, and leaving the entire country in the ruins. I do not think that Petro is the solution to the crisis that Venezuela is currently leaving. To make Venezuela better, there should be a deep cleaning of politicians in that country.
ReplyDeleteI believe several cryptocurrencies will rise because countries are going to have their personal preference. It is the same today for paper currency. I do believe however bitcoin will be the major backing currency like gold was for the United States.
ReplyDeleteI agree with Andres that in the case of Venezuela, the regime is just trying to use any means at its disposal to reflect a semblance of economic hope. Nevertheless, the petro is likely doomed.
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