Sunday, January 29, 2023

Venezuela Reveals Its Ultimate Cryptocurrency Weapon – the ‘Petro’

Venezuela Reveals Its Ultimate Cryptocurrency Weapon – the ‘Petro’

Cryptocurrency is now officially a geopolitical weapon. Today, Venezuela’s President Nicolás Maduro announced his government will issue a sovereign, oil-backed cryptocurrency called the “Petro” — with the explicit intention of circumventing U.S. government-enacted sanctions.

Also read: UK to Tighten Bitcoin Trading Regulation, Prices Drop

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Venezuela to ‘Overcome the Financial Blockade’

In his weekly Sunday broadcast to the country, Maduro announced “Venezuela will create a cryptocurrency” designed to advance Venezuelan society and “overcome the financial blockade”.

This highlights a long theorized use case — generally assumed to apply to bitcoin — where a sovereign currency allows a user to transact wherever, and with whomever, they want.

If the beleaguered country manages to stabilize an economy that recently defaulted on its debt obligations, then the use of cryptocurrency will be validated on a geopolitical level, proving that the power of the international banking establishment — the power base of the global elite — can be routed around.

The ramifications of this may be immense, despite the fact that the “Petro” is unlikely to be publicly audited and is more akin to the “private blockchain” iteration heralded by companies like R3.

Can Venezuela Do What Other Countries Couldn’t?

Were Maduro’s plan were to materialize, Venezuela would be the first nation state to embrace cryptocurrency. While rumors of a national “e-coin” have surfaced in Estonia, Ecuador and even China, no independent country has formally implemented an actual coin.

venezuela bolivarsEstonia’s proposal was shot down by European Central Bank head Mario Draghi, who reiterated that the ECB was the only entity that can create money for the Euro bloc.

As it stands, the specifics of Maduro’s plan are not known: will citizens be able to transact with the cryptocurrency or will it be solely for international trade? How about exchange rates?

Venezuela has already moved away from trading in U.S. dollars, with a number of contracts set up to trade oil for Chinese yuan. And as it’s also to be backed by a basket of commodities like gold and diamonds, how will other governments respond — will they undermine the prices of oil, gold or diamonds to ensure the Petro’s failure? Or will it be a trial balloon for other countries to implement a digital form of currency, such as the rumored IMF SDR?

Or perhaps other countries suffering at the hands of other governments, like Greece does with the E.U., will be encouraged to take their own a bold, innovative step.

Venezuela’s move away from the USD and its influence has been no secret over the last few years. With the world’s largest reserves of thick, tar like oil, Venezuela has recently made deals with countries like China to transact in yuan.

This was widely seen as Maduro “giving Washington the middle finger”. In recent years, Venezuela’s bolivar has rapidly collapsed as the price of oil, their major export, fell precipitously. Inflation is on track to reach 4,000 percent this year; the one saving grace has been for Venezuelans who held or bought bitcoin as it appreciated.

This dire economic situation comes on the back of long-standing U.S. government destabilization efforts, the most famous of which was an attempted coup against former Venezuelan President Hugo Chavez.

Since that attempt failed, Venezuela’s socialist regime has remained largely isolated from the rest of the world, and has been forced into numerous bond issues and restructuring endeavors — which have also ultimately failed, leaving the nation in default for over $140 billion.

Despite being up against what Maduro labeled a financial “world war”, the policies of the socialist regime have clearly led to a disintegration of the country, with massive ongoing protests and a population malnourished and poverty-stricken.

The Venezuelan upper and middle classes have fled, as have most foreign corporations, exasperated with the socialist model. Still, some commentators believe that the impression the West has of Venezuela is roundly distorted to fit the U.S. agenda, and ignores the geopolitical noose that has been slowly tightening around Venezuela’s neck for decades.

OK Then, What Should They Call It?

There are already many who believe Maduro will not forge ahead with his bet on cryptocurrency’s ability to salvage his deteriorating country from the brink. However his recent speech has firmly put digital assets, and by extension bitcoin, front and center of the financial and economic world — at a time when exposure is already at an all time high.

The only thing left would be to decide on an improved name via Twitter poll. I’ll put my vote down for “The Hugo”.

Is Venezuela serious about creating its own cryptocurrency? What do you think will happen? Let’s hear your thoughts.

Images via Jon Southurst, BusinessInsider

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