Venezuela — rife with double-digit inflation, civil strife and signs of imminent economic collapse everywhere — has seen the future, and it’s in cryptocurrency.
Now, it just has to convince elements of its own citizenry, as well as the rest of the world.
Earlier this month, Venezuelan President Nicolas Maduro said the government plans to float nearly $6 billion in a new unit called “petros,” a cryptocurrency that would leverage its vast oil reserves as money. Just last week, the South American nation sent a high-level delegation to Qatar, in order to court investment.
Yet the plan has encountered immediate resistance, not least of which comes from Venezuela’s opposition-run parliament — which nearly two weeks ago declared the cryptocurrency illegal — and the U.S. Treasury Department. Last week, a Treasury spokesperson told Reuters that petros could violate sanctions, and help “prop up” the embattled Maduro government.
Indeed, many investors, some of whom have already been stung by Venezuela’s scattershot attempts to rescue its collapsing economy, have little faith that the fledgling petro will help resolve the Bolivarian Republic’s ongoing crisis.
“The petro is not a crypto. It is more an IOU from the republic backed with oil reserves,” said Mauro Roca, sovereign analyst covering Latin America for TCW’s emerging markets group.
Amid hyperinflation and tens of billions in unsustainable debt, “the country is having serious problems extracting oil, so it will be difficult that these IOU retains much value,” Roca said. “It is unlikely that the petro contributes to solve the critical situation regarding the macroeconomic backdrop.”
Other analysts echoed Roca’s bleak assessment, saying the petro wasn’t a cryptocurrency that would be accepted by most — if not any — external entities.
“It is unlikely that this made-up currency will be accepted by any company or bank in lieu of cash,” said Raul Gallegos, associate director at international consultancy Control Risks.
Gallegos, a Colombia-based author who recently wrote a detailed account of Venezuela’s mismanagement of its oil wealth called “Crude Nation,” told Giftofaservant that petros could become a vehicle that could be used to secretly move cash out of a collapsing economy, and convert it into foreign currency.
“So it will become a money laundering tool for well-connected people with” the current and former regime of deceased President Hugo Chavez, he added.