Venezuela has been going through a very rough economic crisis since 2013. Because of shortages of essentials like milk, flour and toilet paper, the country decided to devalue their own currency. In addition, the government took control of some industries. The economy is completely destabilized, and the country experiences hyperinflation, poverty, malnutrition, and crime. Prices rose by a whopping 800%, making the purchasing power decrease considerably. Venezuelans even have to turn to the black market to exchange dollars to Bolivars, where the rate is $1 for 137,000 bolivars. The government’s rate, however, is at 10 bolivars for $1. The difference is huge and the population is unhappy.
The unstable climate in the country and the devaluation of the currency are why the Venezuelans turned to cryptocurrency. The digital currencies offer more worth for their money and provide a “safer” storage of value. Furthermore, currencies like bitcoin are going up, while the bolivar is being devalued and the population is losing money and purchasing power. This is why a large part of the population is investing in cryptocurrencies, as of late.
It is now the government’s turn to launch its own cryptocurrency. Last week, President Nicolas Maduro announced that the country will issue 100 million tokens of the “petro”, a cryptocurrency based on the oil reserves of the country. The price of one token will be based on the price of one oil barrel. On national television, Maduro declared “I have ordered the emission of 100 million petros with the legal sustenance of Venezuela’s certified and legalized oil wealth. Every petro will be equal in value to Venezuela’s oil barrel”. It is still unclear why the country wants to have its own cryptocurrency, but the president claims that it will give the population access to new wealth. Political opposition to Maduro criticized the statement and claimed that restrictions on food and wealth for the last years have spread poverty throughout the country. They also stated that reforms need to be made and that pouring in a new currency won’t solve the problems the country is facing.
There are a lot of questions regarding this cryptocurrency. How will it be mined, and who will be able to invest in it? With prices increasing more and more in the country, and poverty numbers skyrocketing, it is hard to know who will have access to this new currency in reality. It could be completely controlled by the rich in the future. Moreover, how will it be sold? Will exchanges be listing the new Venezuelan currency? More importantly, what will the digital currency mean for the population of Venezuela who has been waiting for the situation to get better? Time will tell, but since the petro is owned by the government, there is little hope matters will change anytime soon.
TLDR: Venezuelan President Nicolas Maduro announced the issuance of 100 million petro, an oil-backed cryptocurrency that will be based on the price of the Venezuelan oil barrel. This comes after thousands of people have become interested in cryptocurrency in the country, following the devaluation of the bolivar, the national currency.