Why Venezuela’s Failed Cryptocurrency Could Not Fix 359.99% Yearly Inflation
Venezuela is a country that has been suffering from hyperinflation for years. The government tried to solve this problem by creating its official cryptocurrency, the Petro, in 2018. But what was the Petro? And why did it fail to solve the country’s 359.99% inflation rate in 2023?
What is the Petro?
The Petro was a cryptocurrency backed by Venezuela’s oil reserves. The government claimed that each Petro was equivalent to one barrel of oil and that it could be used to pay taxes, fees, and public services. The Petro was also supposed to be a way to circumvent US sanctions and access international markets.
However, the Petro faced many challenges and criticisms from the start. Many experts doubted its legitimacy, transparency, and security. Some argued that the Petro was not a real cryptocurrency, but a centralized digital token controlled by the government. Others pointed out that the Petro’s value was not determined by market forces but by the government’s arbitrary decisions.
Why did the Petro fail?
The Petro failed to achieve its goals for several reasons. First, the Petro lacked adoption and acceptance, both domestically and internationally. Many Venezuelans did not trust the government or the Petro, and preferred to use other cryptocurrencies or foreign currencies instead. Many international investors and exchanges also avoided the Petro, fearing legal repercussions or fraud.
Second, the Petro did not address the root causes of Venezuela’s hyperinflation, which were fiscal irresponsibility, monetary expansion, and economic mismanagement. The government continued to print money and spend beyond its means while failing to diversify its economy or improve its productivity. The Petro did not solve these structural problems, but only added more complexity and confusion to the monetary system.
Third, the Petro faced technical and operational difficulties, such as delays, glitches, hacks, and scams. The Petro’s launch was postponed several times, and its official website and wallet were often offline or inaccessible. The Petro also suffered from security breaches and cyberattacks, such as the theft of $5 million worth of Petros in 2019. Moreover, the Petro was involved in several corruption scandals and illicit activities, such as money laundering and drug trafficking.
What is the future of the Petro?
The Venezuelan government has reportedly put an end to its official cryptocurrency, the Petro, in January 2024. According to sources, the government decided to abandon the project after realizing that it was not viable or profitable. The government also faced pressure from the International Monetary Fund (IMF), which demanded that Venezuela stop using the Petro as part of its debt restructuring negotiations.
The demise of the Petro marks another failure for Venezuela’s attempt to overcome its economic crisis with an unconventional solution. The Petro may have been an ambitious and innovative idea, but it was poorly executed and poorly received. The Petro did not fix Venezuela’s inflation problem but only made it worse.
Sources
- [Here’s Why Venezuela’s Failed Cryptocurrency Could Not Fix 359.99% Yearly Inflation](https://www.msn.com/en-us/money/other/here-s-why-venezuela-s-failed-cryptocurrency-could-not-fix-359-99-yearly-inflation/ar-BB1gZLMN)
- [Venezuela’s Cryptocurrency Is One of the Worst Investments Ever](https://www.bloomberg.com/opinion/articles/2018-03-09/venezuela-s-cryptocurrency-is-one-of-the-worst-investments-ever)
- [Venezuela’s ‘petro’ token launch was amateur hour](https://www.coindesk.com/venezuelas-petro-token-launch-was-amateur-hour)
- [Venezuela Abandons Its Official Cryptocurrency Project](https://www.cryptoglobe.com/latest/2024/01/venezuela-abandons-its-official-cryptocurrency-project/)
