Venezuela turns to cryptocurrency in fixing crumbling economy

Aug 21, 2018 at 22:12

In what is seen as a visionary bid to temper the hyperinflation in the country, Venezuelan President Nicolas Maduro has recently announced the devaluation of the country’s fiat currency, the bolivar, while shifting to a more stable, devaluation-proof cryptocurrency.

Maduro’s recovery blueprint, dubbed as the Programme for Recovery, Growth and Economic Prosperity, would serve as a pivot point for the country’s ailing economy and would center on the use of Petro—a sovereign crypto asset that is issued and backed by the state—according to Bloomberg.

In a white paper issued at the start of the year, the Venezuelan government is hoping to issue some 100 million Petros based on NEM blockchain. The crypto issuance will be associated with the country’s most valuable asset—its oil reserves.

But months since its first issuance, Maduro has yet to clarify several questions surrounding Petro.

While the digital coin is anchored on the previous day’s oil basket price, minus the variable discount, taxes and other fees, the actual trade value of the cryptocurrency has yet to be announced.

In a televised announcement on August 18, Maduro said that the Petro will cost about 3,600 bolivars (US$60) and has the capability to fluctuate depending on the demand.

But the clout surrounding its actual value and its mechanics has led many critics to question its security, while others even called Petro a fraud and a scam after its initial coin offering.

ICOindex.com, one of the biggest critics of Petro, cited the lack of general information on how the cryptocurrency is guaranteed by the oil reserves and how the beleaguered South American nation would be able to manage complex blockchain technology.

Another questionable scheme in coin’s issuance was the decentralization and freedom from third-party or government control, which is not applicable to the Petro.