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 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.
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.