Venezuela Cryptocurrency (Petro) Left in Limbo

By Maheen Hernandez September 24, 2018 Off
petro venezuela

President Nicolas Maduro’s government continues to insist that the controversial cryptocurrency of Venezuela will start working. However, ever since this so-called Stable Coin of Venezuela was launched, it has been left in the limbo.

“The Venezuelan government set its value at $60, anchoring it to the price of a barrel of oil.” It is not listed on virtual exchanges, which means “It still doesn’t exist,” per Moises Rendon.

However, president Maduro has to say that from October 1 “the petro will start functioning as a currency of exchange for purchase and conversion.” He added that this currency will be offered via auctions and that private companies will gain access to this currency via auctions.  The release will be within the framework of the exchange control operating ever since 2003.

“It will be immersed in the global market,” states Maduro, about the Venezuelan crypto.

Venezuela is currently phasing through a significant economic crisis that has been revolving around hyperinflation and sharp currency devaluation. The country has been exploring if cryptocurrency can be a solution for a society that is suffering from the consequences of a broken national currency.  Will cryptocurrency serve to be an alternative? Can countries adopt cryptocurrency as an alternative to save its economy suffering from a broken currency?

Moises Rendon, from Washington-based Center for Strategic and International Studies, says “it’s too late to save the petro. There’s no confidence and it won’t get any”

The Venezuelan government is desperately trying to prevent the fluctuation of its currency as a result of its struggling oil industry.  The country has an external debt of $150 billion.  The oil production of the country is currently “Producing a 30-year low of 1.4 million barrels a day, compared to the record high of 3.2 million 10 years ago”

Armando who makes a living of cryptocurrencies has to say that buying petro “is very risky.”  He has made a small investment in Petro, which he says is a loss.

The unexploited crude field in Orinoco Belt, the largest crude reserve in the world is proposed by the government as a support for the petro.

“It doesn’t know how to exercise its rights over that reserve”, according to oil specialist Luis Oliveros, about the government’s stand on the oil reserve meant to back the Petro.

There are several other popular cryptocurrencies in Venezuela that can work as a guard against the hyperinflation situation, the Petro has failed to instill investor confidence.

Rendon states that Venezuela is a country, which provides for the fourth largest amount of Bitcoin transactions, which is about 12%.

The minimum salary has been increased by more than 34% as a part of the economic reforms launched by Maduro.  This has occurred in a scenario where the currency of Venezuela has been devalued by 96 percent.

Whether the Petro will serve as an answer to the Venezuelan economy and its long-suffering citizens is something we have to witness in the days to come.