Three months ago, in a not entirely surprising move meant to circumvent US economic sanctions on Venezuela, president Nicolas Maduro announced that his nation would stop accepting dollars as payment for oil imports, followed just days later by the announcement that in a dramatic shift away from the Petrodollar and toward Beijing, Venezuela would begin publishing its oil basket price in Chinese yuan. The strategic shift away from the USD did not work quite as expect, because a little over two months later, both Venezuela and its state-owned energy company, PDVSA were declared in default on their debt obligations by ISDA, which triggered the respective CDS contracts as the country's long-expected insolvency became fact.
Fast forward to today when seemingly impressed by the global crypto craze, Maduro on Sunday announced the creation of the "Petro", Venezuela's official cryptocurrency "to advance in the matter of monetary sovereignty, to make financial transactions and to overcome the financial blockade".
"Venezuela announces the creation of its cryptocurrency, the Petro; this will allow us to move towards new forms of international financing for the economic and social development of the country," Maduro said during his weekly television program, broadcast on the state channel VTV.
????????????Presidente @NicolasMaduro: Anuncia que— PDVSA (@PDVSA) December 3, 2017
Venezuela va a implementar un nuevo sistema de criptomoneda para avanzar en materia de soberanía monetaria #DomingosConMaduro98 pic.twitter.com/Ypr7hpqCTq
"The objective is to advance in the Venezuelan economy and overcome the financial blockade, this allows us to continue in the economic and social development supported by Venezuelan riches," said the president, explaining that his government will make a cryptocurrency issue "backed by reserves of Venezuelan gold, oil, gas and diamond wealth."
It was not exactly clear how this PetroCoin would be backed by various natural resources when the whole point of cryptos is that they are not backed by anything, and as such it appears that what Maduro is trying to do is admit that the hyperinflating Bolivar has failed as a sovereign reserve, and the country is hoping to confuse its global trading partners enough into believing that it somehow had a new "bitcoin" on its hands, which like the real thing would then proceed to appreciate in value in the near future.
While that is very much doubtful, as of this moment there is little additional information on this radical monetary overhaul, which is why we were amused by the following rhetorical question: instead of a cryptocurrency, perhaps Maduro meant to unveil the world's first kleptocurrency instead?
You sure he didn't say 'KLEPTO-currency'? https://t.co/Mm2yNqqFGq— Wild Goose (@TrueSinews) December 3, 2017
Joking aside, perhaps Maduro is on to something: as CoinTelegraph reported some time ago, "Venezuelans have found a better alternative to escape hyperinflation. They’ve taken Bitcoin as an alternative, and mining Bitcoin has become big in the country." The reason: unlike most places in the world, electricity here is virtually free, allowing miners to create blocks without almost any recurring costs:
With few utilities that its citizens can still afford, electricity happens to be among them. In fact, electricity power in the country is hugely subsidized and virtually free. This is all thanks to President Nicolas Maduro of the socialist regime.
Such a setup created an opportunity for struggling citizens, as Bitcoin miners can run many transactions and earn at least $500 a month. This can feed a family and provide them their basic needs – goods, medications, and such.
That said, Venezuela's miners quickly become the government’s “capitalist parasites”, since Bitcoin is still not legally regulated in the country, leading to some miners getting arrested for stealing free electricity. In other words, what Maduro is trying to do is impose the first de facto sovereign crypto, one which however has no other parallels to any of the dozens of other accepted cryptocurrencies.
One also wonders how long until the Venezuela government launches the first ever bailout ICO to save, well, itself.
One thing is clear, however: the fate of the "Petro" will be closely watched by the rest of the world in the coming weeks.