CARACAS – Venezuela’s officials have announced the launch of a national cryptocurrency called Petro as a solution to fix the current economic state.
The cryptocurrency will be backed by Venezuela’s oil, gas, gold, and diamond reserves and the officials plan to overcome the financial blockade with this new project. Part of the attraction of cryptocurrencies is that their technology helps circumvent the world’s finance ecosystem by enabling trade payments in forms other than fiat currencies.
This could be a boon to the Venezuelan Bolivar, which has rapidly depreciated in the last two years. For example, the US dollar, which is typically used for global trade, had gained 10,768% against the Bolivar as of November 2017. Russia, another country that has been a subject of U.S. sanctions and is considering a national cryptocurrency, is a major trading partner to Venezuela.
The petro, President Nicolas Maduro said in his Christmas televised broadcast, would help Venezuela “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”
The real currency, the bolivar, is in freefall, and the country is sorely lacking in basic needs like food and medicine.
Still, the announcement highlights how sanctions enacted this year by U.S. President Donald Trump’s administration are hurting Venezuela’s ability to move money through international banks.
Washington has levied sanctions against Venezuelan officials, PDVSA executives and the country’s debt issuance.
Maduro’s pivot away from the U.S. dollar comes after the recent spectacular rise of bitcoin, which has been fueled by signs that the digital currency is slowly gaining traction in the mainstream investment world.