But bad policies have resulted in its economy spiraling into a vortex of hyperinflation, poverty, and widespread unemployment. To make matters worse, US sanctions have further fueled its economic crisis. Earlier this year, Venezuela unveiled a national cryptocurrency — the petro — to circumvent those sanctions. The idea was to enable transactions in currencies other than the US dollar. But a recent Reuters report claims that the cryptocurrency is yet to take off, much less compete with the American Superman.
The publication investigated the coin and found little evidence that it was being used in mainstream society. It was planned to be used as a medium for daily transactions like a fiat currency , as an investment vehicle, and as a digital platform to represent real-world assets, such as real estate. The Reuters journalists did not find any users who used the cryptocurrency for daily transactions. They found just two people who bought it after its release. News reports suggested that Venezuela had plans to back the cryptocurrency with its oil reserves.
But the whitepaper does not mention this link. When the journalists went to the proposed region for drilling, they found little evidence of oilfield activity. Based on pictures accompanying the article, it would seem that the region is barren and poor. Conversations with resident villagers there also did not yield much information or optimism about future prospects of oil discovery.
Reuters scoured the NEM blockchain, which was used for the initial round, for addresses and their petro holding amounts. But there is a caveat to this calculation. First, the petro itself does not have any value since it is not traded on any cryptocurrency exchanges, according to the Reuters investigation.
Second, the petro, as it was conceptualized, may not exist at all. When it was launched, the petro was seen as a way out of US economic sanctions on Venezuela. However, subsequent developments have revealed that the cryptocurrency is still to gain mainstream and international traction. Some international observers believe that the primary goal of the Petro digital currency is to circumvent U. Cryptocurrencies have been criticized as a tool to launder illicit gains by bypassing currency controls and regulations.
If the Petro were successful, it could allow sanctioned individuals to move money out of the country by buying Petros in Venezuela and selling them outside the country for euros or dollars. The announcement of the Petro received a mixed reaction in the cryptocurrency community.
One of the major selling points for Bitcoin and other cryptocurrencies was decentralization: no single actor could control or censor blockchain transactions. Having a national government directly control a digital asset would not only go against the principles of the cryptocurrency movement, but also undermine the value of the currency.
It is not clear to what extent the government controls the Petro, including the ability to halt or reverse transactions. In , the Petro ledger was shut down for "maintenance"—which would be impossible on a true blockchain. Mining nodes are registered with the Venezuelan government, and it is also not clear how—or if—Petros can be redeemed for their underlying assets.
The response to the Petro in international markets has been underwhelming. A Reuters report detailed problems with the cryptocurrency, from lack of users within Venezuela to an absence of international investors. However, actual use remains low.
Some even claim that investors only committed to buy the cryptocurrency and have not actually purchased it. In , Maduro said that the Petro would be backed by 30 million barrels of oil, instead of the original five billion announced during the launch.
Despite the lackluster reception, Maduro has continued to push for Petro adoption. The following year, he again pledged a "revival" of the moribund digital currency. Brookings Institute. Your Money. Personal Finance. Your Practice.