It is quite known that Venezuela is suffering economically. And one of the reasons why the country is suffering economically is due to the sanctions given by the US and its allies. In reaction to this, the Venezuelan government created their very own cryptocurrency. Unlike other cryptos that are based on mere speculation, Petro is based on oil.
And since Venezuela is suffering from hyperinflation, the government decided to freeze the price of utilities in the meantime frozen. This includes both electricity and water bills.
To give you an idea regarding hyperinflation, the Bolivar has lost approximately 99.99% of its original value as inflation rate has gone up by 16,147% in the last five years. In fact, their currency lost its value that it has been used as confetti during baseball games. And by June 4, the government announced that it is cutting three zeros from the end of the currency.
And for this reason, Venezuelan president Nicolas Maduro encouraged Venezuelans to mine. In January, Venezuela announced that it is legal to mine cryptocurrencies following the announcement of Petro. What it can do is provide the country with the necessary foreign currency. And why not? In Caracus, Venezuela’s mining hub, it only requires around $530 in order to mine a single Bitcoin.
However, considering hyperinflation, people from Venezuela are now rejecting the country’s own currency. As a result, Venezuela decided to ban mining hardware. What could’ve been the reason for this change of heart? Is Venezuela actually doing the right thing?
A Ban on Mining Hardware?
The country decided to ban ASIC and other graphics cards that are related to mining. Shipping companies such as Liberty Express and DHL already adopted the new rules by Venezuela. They already updated their pages and even informed their customers regarding these regulations. The National Association of Cryptocurrencies will have a discussion with Superintendence of Cryptoactives and Related Venezuelan Activities in order to sort the issues out.
Superintendent Carlos Vargas mentioned that “we are in evaluation process to select and authorize companies that are qualified to import and market digital mining equipment and be responsible for the respective guarantees in our country”.
A Step Back
Could this be a step back on the part of Venezuela considering how mining could ultimately give the country the much-needed foreign currency that the economy needs? Or is this the right call in order to avoid Venezuelans from shifting towards cryptocurrencies instead of using their own currency?
Venezuela isn’t the only country that has been suffering from absurd inflation rate. South Sudan and Nigeria are also suffering from these economic problems. In fact, cryptocurrency adoption is becoming common in these African territories.
Cryptocurrency mining can be tricky. It is an energy extensive activity that will require powerful computers in order to solve complicated mathematical equations. With cheap electricity coupled with the potential to earn dollars, it is expected that there would be an increase in the number of miners in the country. However, could it have been the solution that Venezuela was waiting for in order to increase its dollar reserves?