It has been a rocky road for President Maduro of Venezuela. The South American leader announced in December his plans for Petromoneda, a cryptocurrency backed by a barrel of oil per coin, but the proposed crypto is yet to get off the ground.
The first issuance was ordered on January 6th 2018, with 100,000,000 Petros planned, and each one backed by oil, but three days later and the Venezuelan parliament – of which Maduro’s Socialist Party does not hold a majority – declared Petros an illegal currency and blocked the move.
Critics believe the proposed currency is a way to evade the current financial sanctions in place against Venezuela from the US and other nations and fear the potential rise in illegal transactions and criminal activity.
President Maduro of Venezuela, speaking at a rally in May 2017.
President Maduro has called on the Bolivarian Alliance for the Peoples of Our America (ALBA) to work with him on the creation of the Petro. Its members include Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Nicaragua, Saint Lucia, Saint Vincent and the Grenadines, Saint Kitts and Nevis, Grenada, and Venezuela. The plan could create a reliably-backed cryptocurrency, which in turn would provide price stability and garner popularity.
Given that Venezuela has a natural seaport and borders Brazil it’s strategically well located, but the country’s economy is weak. The Bolivar is losing value rapidly and the IMF are projecting 13000% inflation for the country in 2018. Compare this to 2015 and 2016 when the total was already a risky 100-150% inflation and you can see how bad a state Venezuela is in – to the point that UNICEF are warning of a malnutrition crisis amongst children.
There are fears that the nation’s reserves are non-existent and coupled with this hyperinflation and the prospect of a centralised crypto (something that goes against the nature of cryptos) it’s felt that the Petromoneda is a heavily flawed pipedream that, if followed through on, could be disastrous.