Venezuelan President, Nicolas Maduro, has outlined plans to issue a cryptocurrency backed by oil, but the opposition has responded vigorously, declaring the move unconstitutional and warning that it constitutes the illegal issuing of debt.
Venezuela has been stricken by four years of recession that have resulted in the highest rate of inflation in the world and left millions in poverty. In response to this crisis, Venezuelan President Nicolas Maduro announced a plan to galvanize the nation’s economy by issuing a new form of currency, the Petro, a cryptocurrency supposedly backed by oil reserves.
Maduro says that each token (100 million in total) would be backed by a barrel of oil in a move to bolster Venezuela’s crumbling economy which Maduro has said is suffering from the ‘economic war’ waged on the nation by both the opposition of his government and financial sanctions imposed by the USA.
For this reason, the ANC has lauded the move as an ‘act of rebellion’ against sanctions imposed by Washington.
The critics of this move have several causes for concern. Firstly, they suggest that moving to a national cryptocurrency will have no immediate benefit for the millions of Venezuelans who are struggling in the current economic climate – people are desperately poor, and looting is rife.
The suggestion has also been made that the Petro is not even a real cryptocurrency but is instead hiding behind a thin veil of technological jargon in an attempt to sidestep sanctions that prevent Venezuela from accessing the international debt markets. Additionally, as Maduro is up for re-election next year, the opposition believe that there is little reason for investors to have confidence in the Petro. Maduro may not get re-elected, given the current financial crisis, and the fact that the opposition is against the move suggests that, with Maduro’s departure, the currency could be doomed to fail.
The situation is worth watching closely
In an interview with CNBC, Sunny Lu of Vechain said that it would be interesting to see how the project is run and that only time will reveal whether looking to the blockchain for salvation can help Venezuela. Lu also mentioned how China’s government is supporting blockchain technology in its five-year plan and discussed rumors that they may be looking into their cryptocurrency.
These comments should be of particular interest to the crypto community because, although Venezuela may be looking to blockchain technology out of desperation, the adoption of cryptocurrency by an economic superpower would shake the world.
Michael is an English and Creative writing graduate of Liverpool John Moore’s University, a former editor of several magazines, and a crypto-currency enthusiast. He is mostly interested in crypto-legislation and the potential of decentralized technology to change the world.