In the last ten years, Bitcoin has changed the way we understand finance. In the last ten years, regulators are still trying to figure out how Bitcoin and cryptos are going to fit in today’s system. In theory, using blockchain technology, it doesn’t depend on any government.
But now, even countries are applying blockchain technology to help resolve economic woes. You have countries such as Iran that made use of cryptos in order to circumvent US sanctions. The same approach is being used by Venezuela. But Venezuela decided to have its own cryptocurrency named Petro not only to escape US sanctions but hopefully to resolve the crisis the country is in.
Venezuela is currently experiencing hyperinflation. The Bolivar has been losing value thanks to the policies of the Chavez administration, not to mention the US sanctions that worsened the problem for Venezuela.
Venezuela is a Hotbed of Crypto Movement
It has been reported before that there is a growing number of crypto miners in the country. How do they afford to mine Bitcoin? The Maduro administration stopped the price increase for basic commodities including electricity. And because of this, Bitcoin mining has become a popular activity in the country.
Also, you have the popularity of Dash. Businesses are starting to accept Dash mainly because of the volatility of the Bolivar.
A data from Coin Dance discovered that despite the bearish market on Bitcoin, Venezuelans transacted 1284 BTC worth $5.1 million via P2P trading platform Localbitcoins.
Problem with Petro
Petro is said to be backed by oil. However, this is controversial since there are critics questioning where the barrels of oil are located. And now, the Petro has been increased from 3,600 bolivars to 9,000.
This isn’t the only problem that Venezuela has with its cryptocurrency. There is still no wallet for the petro but Venezuela has been issuing certificates of purchase to its buyers. What made the Maduro increase the price of Petro? Experts believe that it’s the accumulation of problems including the 150 percent increase in the monthly minimum wage, which is already the sixth rate hike of the year.
Now, what exactly happens to the sovereign bolivar? In August, Maduro decided to have a new currency that is backed by its cryptocurrency. But Leonardo Buniak who is a Venezuelan economist explained that “Petro was worth 3,600 Bs.s because the Dicom dollar cost 60 and the oil cost 60”. He also added that “now a petro is decreed at 9,000 Bs.s…you have just devalued the sovereign bolivar with respect to the petro and by more than 100%”.
He further elaborated that “anchoring the bolivar to the petro is anchoring it to nothing”. Now, for Buniak, he thinks that Petro shouldn’t be called a cryptocurrency mainly because the value is dictated by Maduro and not the interaction between supply and demand. He explained that “When the president decrees that a petro is worth 9,000 Bs.s, what he is saying is that the petro is not a cryptocurrency but a debt title that is predetermined, (which) cannot be mined. It is impossible to think that it is a cryptocurrency when its value is not given by the interaction between supply and demand”.
Now, does it even make the case that Venezuela’s effort to solve its economic problems going to end up bad?