On his weekly television address on Sunday, Venezuelan President Nicolás Maduro announced plans for the country to develop a state-backed cryptocurrency. Apart from revealing the proposed digital currency’s name — the Petro — and claims that it will be backed by the country’s oil, gas, gold and diamond wealth, Maduro provided few details about the initiative. Given the chaotic political and economic situation in Venezuela, the Petro appears to be aimed at providing a new, less volatile currency for the country that isn’t subject to current U.S. and E.U. trade sanctions.
Maduro’s cryptocurrency plan has been met with open skepticism by the Venezuelan media, as his previous economic policies are widely blamed for the dramatic financial collapse within the country. The country’s fiat currency — the bolívar, or Bs.F. — has experienced severe hyperinflation following the 2014 drop in global oil prices, wreaking havoc on the country’s social and business infrastructure. In 2014, one U.S. dollar exchanged for 100 bolívars. Today, that same dollar will buy 100,000 bolívars on the country’s black market currency exchanges.
Understandably, many within Venezuela have turned to hoarding other currencies — particularly the U.S. dollar — in an attempt to protect their wealth from the volatility of the bolívar. With physical dollars becoming scarce in the country thanks to currency controls, however, Venezuelans have increasingly found themselves turning to bitcoin and other cryptocurrencies.
Ironically, Maduro’s government has been largely antagonistic towards cryptocurrency use and mining. In 2016, for instance, two Venezuelan cryptocurrency miners were arrested and jailed for months, despite there being no laws in the country forbidding the practice. (According to some sources, the pair were detained on charges of “energy theft and possession of contraband.”) The situation has escalated since, with dozens of unconfirmed reports surfacing of cryptocurrency miners and traders being accused of everything from money laundering to terrorism.
The announcement of the Petro may represent an acknowledgement by the Maduro administration that cryptocurrency mining is one of the few functioning elements of the Venezuelan economy. The country owes more than $140 billion in debt to foreign creditors, and has a growing track record of defaulting on loan payments. The move towards a state-sanctioned cryptocurrency may be less about adopting technological innovations, and more about avoiding the international banking system.
Until more details about the Petro are released, however, Venezuelans are likely to be highly skeptical of Maduro’s latest financial idea.