Cryptocurrency in Venezuela

Cryptocurrency in Venezuela

Venezuela has created their own cryptocurrency in an attempt to keep their government afloat on the blockchain wave. It’s called the Petro and is allegedly backed by stockpiles of oil and other natural resources. Over 127 countries have reportedly participated in the ICO generating billions of dollars. Venezuela has the largest proven oil reserves in the world, so in theory, a cryptocurrency backed by their vast amounts of natural resources could work. The Petro is controlled by Maduro’s regime and it’s meant to preserve their power and influence. These guys obviously didn’t manage their money very well, but does it really justify a military intervention or our current sanctions against them?

The Petro

The Venezuelan government is going so far as giving 30% discounts to countries, like India, that pay for oil with the Petro. Other countries that have implemented a government-backed crypto are Senegal, Tunisia and The Marshall Islands. They have all seen limited success, however.

Since the monthly electricity costs can be purchased for about a third of the price of a cup of coffee, Venezuelans have been building mining rigs to harvest cryptocurrency for next to nothing.

Fortunately, the Petro isn’t the only crypto on the block. Bitcoin has seen a massive adoption rate in Venezuela. The weekly trade volume for bitcoin rose from 170 to 2000 BC in 2018 on the P2P platform LocalBitcoins. US dollars are difficult to get due to current sanctions, and their own currency (bolivar) has seen an 830,000% inflation rate in 2018. As the value of the bolivar rapidly deteriorates, Venezuelan’s are being forced to use crypto. The digital currency is ideal because it’s difficult to control and therefore tax. Of course, Maduro is making his best effort to accomplish exactly this.

A Bolivar Tree

Their economic woes are being worsened by the US sanctions against them, but it’s justified as a way to cut off financial support to the Venezuelan socialist government. This strategy of economic warfare borders on “crimes against humanity” under international law according to former United Nations rapporteur, Alfred de Zayas. The poorest people in the country are suffering the most. People are dying because they can’t afford, or don’t have access to, food and medical supplies.

With the massive amount of wealth locked up in Venezuela’s oil reserves, we must question what our true intentions are as we get involved. Are we really trying to liberate the people of Venezuela, or exploit their wealth for our own good? History doesn’t repeat itself, but it often rhymes. Look at what happened with Libya and Iraq. This video gives a pretty quick rundown of the entire situation, it’s edgy but informative.

A large number of people still associate Bitcoin with fraud, money laundering and illegal drug purchases. Criminals do this everyday on the internet with the United States dollar, yet we use both everyday. Any tool can be used with good or bad intent. According to experts, the amount of Bitcoin moving through exchanges and being used for money laundering is less than 1 percent of all transactions. On the other side of the coin, fiat money (like the US dollar) laundered globally in 1 year is over 2 trillion dollars. Most people may not yet realize, but cryptocurrencies can be traceable and transparent, especially when they’re being used by exchanges that follow Know Your Customer (KYC) and anti-money laundering (AML verification processes).

There’s a lot of momentum pushing cryptocurrency into the Venezuelan mainstream. Steve Hanke, hyperinflation expert, and professor of applied economics at Johns Hopkins University has teamed up with AirTM, a Mexico City-based blockchain-powered currency platform. Their goal is to get financial aid to beleaguered Venezuelans and they’ve named the project “AirdropVenezuela.” Another program called EatBCH has reportedly handed out 50,000 meals to the hungry in Venezuela.

How this will end is anyone’s guess. The amount of wealth tied up in Venezuela makes it an attractive target to outside influence. Complicating the matter further is China’s and Russia’s support of the current dictator, President Nicolas Maduro. Cryptocurrency is not the silver bullet that solves their problems, but it will alleviate them.

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This Post Has 14 Comments

  1. Petro is a scam. It was meant to be a fraudulent ICO to get gullible people into giving USD to Maduro.

    The sanctions are warranted, high ranking politicians and military have been involved in crime and repression of the Venezuelan people for way too long.

    Food and medical supplies have not been a priority for the government since a long time before the sanctions. These things have in part become increasingly expensive due to business owners having to go to the black market to buy dollars to buy what they need abroad as well as extortion by government officials to even let the food and medicine pass without being seized and price speculation caused by an inflationary economy.

    The border closings imposed by the Venezuelan dictatorship have a greater impact in diminishing the quality of life of Venezuelans than the sanctions. Ten years ago this would be a different story, but as the oil the price dropped the government stopped spending in almost everything except foreign debt and we had to find the means to get food and medicine, like buying them from Brazil and Colombia. This is why you can now see a lot of Brazilian and Colombian products in Venezuelan stores.

    I’d say this article is heavily influenced by propaganda spread by Maduro’s allies. It’s understandable, Venezuelan contemporary history is very hard to follow and kind of requires insider knowledge to analyze properly.

    1. Thank you for your insightful comment. There’s a lot that I didn’t cover here. This was not intentional, it’s just my focus is on cryptocurrency and blockchain so that’s what’s discussed here. I do not support Petro or Maduro. I encourage readers to research the Venezuelan/Brazilian border situation as that will give them a better understanding of the current situation.

      The fact that the Venezuelan government created a cryptocurrency is interesting. It is only a matter of time until another government implements one in a way that’s conducive to a healthy economy, or is at least superior in some way compared to the currency it’s replacing.

      Do you know if EatBCH or AirdropVenezuela is helping at all?

      Is there another way that the crypto-community can help Venezuela?

      Again thank you for the comment, I hope you are doing well.

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