Venezuela is a nation in crisis. The economy has been hit by a decline in oil reserves and the value of the bolivar; its prevailing currency has plummeted. Named after Simón Bolívar, the 19th-century hero known across South America for leading the independence movement from Spain, the bolivar in recent years has been rendered practically worthless. Now amid a cash shortage, Venezuela is on a collision course with disaster.
The cash crisis is so acute that ATMs now have a daily withdrawal limit of 10,000 bolívars ($1,001.50). Money changers on the black market exact commissions of up to 20 percent to acquire paper money for small business that pay their workers in cash. Even financial institutions are finding their supply on banknotes depleted.
Much of the country’s problems have been attributed to the authoritarian leadership of Venezuelan President Nicolás Maduro. In an unprecedented move, Maduro fired to detained scores of people running the massive oil industry, a key cog in the county’s economic fortunes. This seismic has further upended this industrial bellwether amid the country’s serious economic crisis — another sign of the Madura led totalitarian practices.
Now in a stunning announcement, Maduro has announced the development of a new virtual currency in an effort to help mitigate the Venezuela’s severe economic crisis as U.S.- initiated financial sanctions take hold. Calling it the Petro, he said it would be backed by Venezuela’s oil, gas, gold and diamond wealth.
In a televised announcement on December 3, Maduro asserted that the new crypto-currency would allow Venezuela “to advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.” He said that “The 21st Century has arrived!” as cheers from supporters rang out.
The leftist leader, however, provided few details about the currency launch or how the struggling country would achieve this.
This move follows comes during a period of rising global interest in Bitcoin and other forms of cryptocurrency. Opposition leaders derided the announcement, saying that congressional approval was necessary in order for it to become law. The true currency, the bolivar, is in decline, as the country is sorely in need of basics like food and medicine for its citizens.
A number of folk from the global crypto community weighed in on Twitter regarding this development.
Necessity is the mother of invention. Venezuela is attempting to fight hyperinflation with a new (hopefully, if done right) deflationary crypto currency, the “petro”. As a crypto and digital currency pioneer and inventor, I support this initiative and encourage others to do same.
— Max Keiser (@maxkeiser) December 3, 2017
Man Venezuela’s Government is the most corrupt and criminal government right now! Probably this coin is a way for thw to make money and gain more control over the economy! I support crypto man but you do not know what this government is capable of! WARNING
— Latincrypto (@cryptolatinoAme) December 3, 2017
No investor confidence in Venezuela. It is a hype based desperation move. Possibility for corrupt govt to demonstrate flaws in crypto system = flash rule changes for taxing, exchanges, liquidity, short sellers. NB CME open next wk
— M McBride (@SDRFuture) December 3, 2017
In an interesting irony, Venezuela’s unstable financial environment in recent years has sparked a major interest in bitcoin among tech-savvy Venezuelans seeking a way around authoritarian monetary controls too.
The general consensus, however, is that Maduro’s idea for a centralized use of cryptocurrency is that unlikely to garner much popular support and will would likely flop if enacted.