Thursday, February 2, 2023

Venezuela Moves Away From the Petrodollar, Opening the Door for Bitcoin

Venezuela Moves Away From the Petrodollar, Opening the Door for Bitcoin

In response to President Trump’s new sanctions against them, Venezuela, through it’s state run oil company, has decided to stop accepting U.S. dollars for oil payments.

Also read: Innovate Blockchain Without Tokens, Says People’s Bank of China

Trump Imposes New Penalties, Venezuela Answers

The US has issued four separate rounds of sanctions on Venezuela just this year, the most recent being imposed in late August.

The most recent round of sanctions were the product of an executive order signed by U.S. President Donald Trump, an initiative motivated by the government’s crackdown on democratic protests.

In an effort to circumvent these sanctions, and just generally rebel against the U.S., Venezuela is forcing companies to pay for oil exports with non-U.S. currency.

This move was not completely unexpected as the country’s president, Nicolas Maduro, has talked about “freeing” Venezuela from the dollar.

“Venezuela is going to implement a new system of international payments and will create a basket of currencies to free us from the dollar.”

Maduro continued, addressing the new congressional “superbody”, saying that the government will substitute the USD with other currencies — specifically mentioning the Chinese yuan and Russian ruble.

More Venezuelans Could Gravitate to Bitcoin

The decision to stop accepting USD could end up having a large impact on the country’s citizens, considering the U.S. is a large importer of Venezuelan oil.

Indeed, the U.S. is Venezuela’s largest trading partner — accounting for almost 25 percent of the country’s exports.

With its largest export being crude oil, Venezuela has been heavily dependent on the petrodollar. As of 2nd January 2017, its international reserves stood at $11 billion.

Thus, demand for Venezuela’s currency (the bolivar) could decrease temporarily as American companies switch their invoices to different currencies in order to once again normalize trade relations.

This temporary decrease in demand would further devalue the bolivar, which has already seen record levels of hyperinflation.

Such a situation would certainly leave an opening for cryptocurrencies, such as Bitcoin, to grow within the country as the citizens looks for a way to protect their savings.

Bitcoin may need it too, as it has also fallen into hard times recently — with its price tumbling the past couple weeks — seemingly without end.

Luckily, history seems to point towards this situation, as bitcoin has often been used by people within the country as a store of value to protect themselves against hyperinflation that continues to plague everyday people.

What do you think of Venezuela banning the US dollar for oil exports? Let us know in the comments below.

Images via, Slate

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