Let’s get one thing straight at this point. Venezuela is in an economic collapse mainly from its over-reliance to oil. In addition to this, Venezuela is having a difficult time to maneuver in its international relations mainly because of the sanctions imposed by different countries. Maduro administration’s ingenious solution—a cryptocurrency backed by oil and other assets.
As expected, Donald Trump signed an executive order that imposes new sanctions on Venezuela’s “Petro” cryptocurrency. Trump already mentioned in the past that the South American country is attempting to bypass international economic sanctions against them. Trump already ordered blocking any US transactions that are made using the digital currency.
“All transactions related to, provisions of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token that was issued by, for, or on behalf of the Government of Venezuela on or after January , 2018 are prohibited as of the effective date of this order”
Is Petro Bound to Fail?
The move is perhaps unsurprising for many, In fact, there were already different US lawmakers who criticize the Petro such as Senators Bob Menendez, Marco Rubio, and Bill Nelson. They had the initiative to write letters to the Treasury Department inquiring about the steps that can help protect American investors and prevent Venezuela from raising money.
Maduro’s effort to jump into the crypto hype isn’t smooth in his own homeland as well. In fact, Venezuela’s Congress already denounced the move calling it as “illegal” and unconstitutional. On the other hand, Maduro already claimed that they Petro already garnered $5 billion during its pre-sale. However, there is no evidence that has surfaced to support this claim.
If you will ask Coin Center executive director Jerry Brito, he mentioned that there is really nothing with regards to the US issuing sanctions. He mentioned that “while Venezuela’s attempt to issue a cryptocurrency is novel, there’s nothing new about the US restricting financial dealings with sanctioned countries. Issuing a cryptocurrency is not going to help Venezuela escape sanctions”.
Venezuela’s Current Situation
Venezuela is currently suffering from hyperinflation. In fact, the current worth of its local currency is around 0.00003 USD. And so far, it seems that there could still be more sanctions waiting for Venezuela aside from Trump’s executive order. Both US and EU have sanctions against Venezuela prior to the creation of the cryptocurrency.
Regulations and Crypto
Though the concept of blockchain technology can be considered a game changer in today’s time, it is also true that there are a lot of things that it can potentially bypass. For instance, countries such as Venezuela could potentially solve problems dealing with sanctions. Also, cryptocurrencies can be used for illicit activities. And for this reason, countries are coming up with fresh regulations from banning cryptocurrency exchanges and ICOs to tracking the customers of exchanges.
Though there is no general consensus regarding the use of cryptocurrencies, it is true that investing on cryptocurrencies can be risky. One of the main reasons is that cryptocurrencies are mainly based on speculation. For this reason, Petro could’ve been a great cryptocurrency since it is backed by assets such as oil.