You know you’re in trouble when your only hope for stability is something as notoriously unstable as cryptocurrency. And yes, Venezuela appears to be very much in trouble.
According to Bloomberg, Venezuelan President Nicolas Maduro announced on Friday that he intended to link a new national currency, the sovereign bolivar, to a cryptocurrency of his own government’s making — the Petro. This is the first case of a government tying its economic fortunes so closely to that of any digital currency, and suggests a possible exit path for a country ravaged by hyperinflation.
That is, it would suggest an exit path … if the plan had any hope of turning the country’s messy economic situation around. Instead, the act devalues the bolivar by around 96 percent as it takes its new form while leaving many questions about Petro unanswered.
The changes supposedly went into effect today.
Hyperinflation expert and Johns Hopkins economics professor Steve Hanke cautioned to CNBC that the NEM blockchain-based Petro token likely won’t be some magical cure-all for Venezuela’s ills.
“This is a smoke-and-mirrors operation typical of Venezuela — I’ll believe it when I see it,” he told the publication. “The problem with the Petro is it’s a scam, it doesn’t even trade.”
The Petro, meanwhile, is allegedly itself backed by oil — although that too has been called into question.
“They’re setting up a stand on the front porch of Venezuela to sell snake oil that’s essentially backed by nothing,” managing partner Russ Dallen told McClatchy in March. “People believe it’s backed by oil, but if you read the contract, it’s really not.”
And while you may be itching to mortgage your future for an opportunity to score some Petro coins, those in the United States will have to wait. Back in March, President Donald Trump banned the purchase of the digital currency. It appears unlikely that the ban will be revised any time soon.
So, in summation, the 96 percent devalued Venezuelan bolivar — renamed the sovereign bolivar — is now linked to the Petro cryptocurrency. Petro, meanwhile, is a token that’s supposedly backed by Venezuelan oil, yet has been called a scam.
Yeah, it sure looks like the people of Venezuela are still in trouble.