Petrodollars are Dead, Long Live the Petro – Venezuela’s New Cryptocurrency

President Nicolas Maduro has declared that Venezuela will launch its own cryptocurrency to circumvent financial sanctions.

“Venezuela will create a cryptocurrency … the ‘petro’, to advance issues of monetary sovereignty, make financial transactions and overcome the financial blockade,” Mr Maduro said during his weekly televised broadcast.

Maduro claimed that the petro will be backed by Venezuela’s abundant natural commodities. “The 21st century has arrived,” he exclaimed at the end of the speech.

The Venezuela economy has been in dire straits for a while now. In 2010, 1 US dollar was worth 8 Venezuelan bolivars, but by July of this year you would have needed 8,000 bolivars to buy that same dollar on the black market, according to CNN. The bolivar has depreciated against the dollar by 57% this last month alone. Venezuela’s financial woes are widely attributed to economic mismanagement by the government, but Maduro tends to blame US sabotage.

While such sabotage in South American countries is not without recent historical precedent, and the US has indeed been sanctioning Venezuelan government officials, in this particular instance this line does not seem a persuasive explanation of the country’s problems. Nor is it gaining Maduro many friends, as his opponents blame the economic collapse on his refusal to take measures to stem excessive money printing and currency controls.

Maduro’s announcement was met with scepticism by his opponents. Angel Alvarado, opposition lawmaker, told Reuters: “It’s Maduro being a clown. This has no credibility.”

Bitcoin has become popular in the country as hyperinflation has sucked the worth out of the bolivar, and as heavily subsidised power means that electricity is something which people can easily afford. According to The Atlantic: “A person running several bitcoin miners can clear $500 a month. That’s a small fortune in Venezuela today, enough to feed a family of four and purchase vital goods—baby diapers, say, or insulin—online.”

Maduro’s government has cracked down on mining, but encouraged Bitcoin trading. While the petro may never see the light of day, cryptocurrency does seem to be offering some help to the stricken people of Venezuela.

(Photo: pxfuel)

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