The ‘Petro’ — Venezuela’s Cryptocurrency
On December 3rd, 2017, Venezuelan President, Nicolás Maduro, announced that Venezuela will be launching its own cryptocurrency — the ‘Petrol.’ As most are aware, Venezuela is currently going through its worse economic crisis in history, causing in the bolivar to devalue to all time lows. The infographic below shows the equivalent of $20 USD in Venezuelan bolivars, starting 5 years ago, to today. It’s important to know that the exchange rate here is the official one, the black market exchange rate (which is the one available to the population at large) is 10 times more expensive.
Just to give an idea, while I write this post, $20 USD is equal to roughly 2.06 mil bolivars in the black market. Source.
On September 28th of this year, when 1 satoshi was equal to 1 bolivar, we published this post. Today, just two months later, with the continuing devaluation of the bolivar and bitcoin’s appreciation, 1 satoshi is equal to 11 bolivars. Source.
According to the Venezuelan President, who claims that he has studied the cryptocurrency market in depth, the ‘Petro’ will help Venezuela to:
- Advance its monetary sovereignty
- Facilitate financial transactions
- Overcome economic sanctions, while offering new methods of international financing for the country’s economic and social development.
Right now, there is not much information available on the ‘Petro.’ The televised announcement was followed by a brief introduction to cryptocurrencies, presented by a representative from Venezuelan NGO Asonacrip (National Association of Cryptocurrencies). The NGO’s mission statement is as follows:
Mission: To organize, advise, train, and unite the public and private sectors involved with the mining, exchange, and adoption of cryptocurrencies within the national territory.
Vision: Become a national, as well as international, reference for all subject matters related to the cyrptocurrency ecosystem, acting as a means of democratizing and optimizing the Venezuelan financial system.
- Achieve the legalization and acceptance of cryptocurrencies on a national level.
- Advocate policies for the correct adoption and use of cryptocurrencies in all business sectors, both digital and offline.
- Create commissions linking the public and private sectors together to promote the use of cryptocurrencies.
- Advise miners on how to optimize the use of resources to maximize their energy consumption efficiency.
- Lead Venezuela to become a development hub and global reference for FinTech services.
The ‘Petro,’ is backed by Venezuela’s petroleum, gold, gas, and diamond reserves. It will be difficult, however, to prove the currency’s value, since auditors would need to validate the reserves - and the government is not well-known for its credibility.
Only time will tell if this project comes to fruition or not. It is questionable whether the government is conscious of the underlying risks. Encouraging the emission of national currency and public spend to be more transparent and auditable is not something an incumbent politician would normally opt for.
Nevertheless, it will be ordinary Venezuelans who will have to bear the consequences of this experiment. Good luck to Venezuelans everywhere!