Bitcoin was designed in order for the world to have a currency that isn’t tied to any economy. However, things evolved. Cryptocurrencies are now being used even by countries that are suffering from economic crisis. Venezuela has developed its own cryptocurrency, the Petro.
Suffering from hyperinflation, Venezuela is on the brink of an economic collapse. The bolivar has lost its value. And because of this, there are many who resorted to cryptocurrencies. Businesses are now accepting Dash. In addition to this, there were even reports that mining activity has increased.
As a pro-socialist country, Venezuela has maintained the price of commodities such as electricity. And because of this, Venezuelan techy individuals started their mining operations in order to generate US dollars that come in handy considering the economic situation of the country.
Two Units of Currency?
Since the Bolivar is losing its value, the Petro was developed. It was also made as a solution to the trade restrictions imposed by US allies against Venezuela. Petro is backed by the country’s oil. President Nicolas Maduro announced the creation of another currency. This time around the ‘sovereign bolivar’ is backed by Petro.
In a televised appearance, Maduro revealed that the digital Petro as well as the ‘sovereign bolivar’ are going to be the two units of currency for the country. Maduro also announced that there will be a new salary and pricing system that will be pegged to the cryptocurrency.
According to Maduro, this Petro-based system is expected to alleviate the situation of its workers. He mentioned that this “will mean a substantial improvement in the income of workers”. He also added that “As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the Petro”.
$6 Billion Worth
The Petro was launched last February. It has around 100 million coins. It is worth $6 billion that was made available during its initial sale. There were also discounts offered by Venezuela in order to attract foreign investors.
The primary reason why Venezuela decided to develop a cryptocurrency is to not only skirt sanctions by the EU and the US but to also reduce hyperinflation. In its white paper, it mentioned that the Petro “will be an instrument for Venezuela’s economic stability and financial independence”.
Is It a Scam?
Of course, there are the critics. Observers mentioned that there is lacking in detail how the value is guaranteed by oil reserves. There are websites such as ICOindex.com that has called Petro a “scam”.
While many countries are hesitant to dabble in blockchain and cryptocurrencies, Venezuela had no other choice but to resort to unconventional means. A new banknote backed by the Petro will be issued on the same day that five zeroes are going to be removed from the bolivar. This will be done on August 20.
Maduro mentioned that “It will be the second unit of account of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry”. Could this help the economic situation in Venezuela improve?