President of Venezuela, Nicolas Maduro, announced on Sunday that his country will launch a cryptocurrency to fight the financial blockade imposed by the United States. The US-led sanctions have created a number of economic barriers for Venezuela to export resources and move money through international banks.
“Venezuela will create…the ‘petro’, to advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade,” the socialist leader said on television during a five-hour broadcast. “The 21st century has arrived!”
The digitial currency, unlike Bitcoin, would be backed by the large oil and gas reserves in Venezuela, as well as other resources they have. Opposition leaders and other commentators have cast doubt on Maduro’s announcement, arguing that he would need congressional approval, as well a financially sound infrastructure to incorporate a cryptocurrency.
Not to mention that a digital currency backed by a material resource whose value is subject to change sounds counterintuitive to how a cryptocurrency is supposed to work.
“It’s Maduro being a clown. This has no credibility,” Angel Alvarado of the opposition told Reuters. Another legislator in the opposition, Jose Guerra, added that he “sees no future in this.”
But Maduro’s announcement follows the staggering surge in Bitcoin’s value — to the point it has become one the 30 largest currencies in the world. This could signal the rise of digital currency as a major player in global exchange and investment.
The headline-making cryptocurrency, like other cryptocurrencies, is decentralised, meaning that it isn’t backed by any government or central bank. Cryptocurrency operates entirely on the internet, specifically on a blockchain — a kind of communal, digital ledger.
Maduro’s idea for a national cryptocurrency bears an interesting resemblance to Muammar Gaddafi’s plan to create an independent “gold dinar” currency for African countries. This was before Libya was bombed by NATO, and Gaddafi subsequently killed.
Venezuela’s current currency — the bolivar — is dropping fast now. Excessive printing and currency controls have led to a 57% depreciation against the US dollar in the last month. As a result, the minimum wage has dropped to $4.30 an hour.
Maduro says he is trying to combat a Western effort to destablise his government and end socialism in Latin America. On Sunday, he said Venezuela was facing a financial “world war.”