Venezuela just took extreme measures to try and stabilize its currency. Hyperinflation, politics, trade laws, and corruption caused the country’s currency to be massively devalued and renamed. Now, in desperation to regain some control, the currency is being tied to the state-issued cryptocurrency, the Petro. The Petro is already volatile since it is based on ever-fluctuating oil prices and because of this, no one knows what to expect from this unprecedented move.
The Petro was first introduced to Venezuela earlier this year raising more than $3 billion from foreign governments and private buyers (President Trump forbade the United States from taking part). The intended purpose of the coin would be a liquid asset to reflect the price of oil. The published whitepaper speaks about these ideas, but in broad generalizations and lacks any technical details. In fact, the country’s own national assembly called the altcoin unconstitutional, while the majority of blockchain experts called it a scam. The rumored Russian involvement also needs to be taken into account when considering if this was the best move for Venezuelans and not simply the Venezuelan government.
President Nicolas Maduro’s administration first came up with the cryptocurrency as a way to gain credibility and stability for the country’s currency. The bolivar had already lost more than 90% of its value over the last ten years and was renamed the sovereign bolivar. The promise is that this altcoin would bring the pre-inflation price back to the bolivar. A loaf of bread that currently costs 100,000 bolivars could now go back to 100 bolivars. Whether or not that will actually happen, is yet to be seen. However, it seems unlikely that this scheme will benefit the people of its nation as they have no use for oil-based cryptocurrency and would simply like to buy food, water, and possibly a train ticket out of the country. This all seems interesting and informative for the crypto-community as whole, but the humanitarian crisis shouldn’t be ignored.