Why Venezuela’s Cryptocurrency Petro will not succeed

Venezuela's President Nicolas Maduro
(AP Photo/Ariana Cubillos)

Legacy media and Washington are agitated about Venezuela opposing international sanctions using a horrifying state-backed digital currency. If you look closely, you will see that there are many impediments working against the Bolivarian Republic: hyperinflation, nonexistent reserves, and centralization. The move will not succeed, that is if it’s ever initiated.

Francisco Monaldi of Rice University put it clearly to Foreign Policy; he stated that the fact that the digital currency is supported by reserves is an absolute fiction. He dismissed Venezuela’s effort at a state-backed digital currency – the Petro (Petromoneda)

Most countries envy Venezuela for it tops South America’s rounded north; it is surrounded by the largest continent, and most flourishing economy – Brazil. However, this doesn’t matter because the International Monetary Fund predicts 2018 as the year Bolivian Republic will reach 13,000% inflation.

Half of Venezuela’s financial system has dissipated as it gets to a third yearly double-digit decline. UNICEF foresees a rising child undernourishment catastrophe, indicating this may be a continuous issue for a while. There are more stories of daily anxieties and they are accumulating.

Venezuela's soaring inflation

Away from the crisis, the international penalty has a role in Venezuela’s collapse. From the US hostile stance ever since the Bush leadership to current warbling from the EU and Macron (French president) siege and entry to capital definitely took a great toll.

In a bid to avoid sanctions, the current administration created a new strategy – Petro. It is apparently a desperate effort to get back fiscal jurisdiction. Proposed during the rise of bitcoin value last year, just mentioning it has caused anxiety in Washington. Although Washington has decided not to use Bitcoin, it has taken advantage of its move. All they know of are broadcast and information haunting bitcoin’s price run and that has caused reasons to fear (Petro) as a restriction killer.

Redemption and Reputation issues

Basically, the country has not maintained the state’s resources adequately. This is due to lack of foreign expertise. Additionally, as Venezuela manage oil program, it is an extremely frustrating exercise which has placed commodity recovery towards the range of impossible:  Petro investors would have to hope that their digital currency could be regained.

For the past months, the price change of Bitcoin has made people know more about the digital currency. This would prevent a lot of people from using Petro as a way of exchange.

Finally, the ultimate satire of Petro is that it is not a digital currency in any significant way. The country is discouraged by government financial regulations and they might not relinquish all power and jurisdiction to the computer algorithms of the state. The issue of fiat tickets will be dominated by the government who has the capability to observe all accounts, purchase fiscal movements, and close down entry immediately.