The Venezuelan army turns to crypto mining as the country’s economy collapses. In reality, however, the government will almost certainly accept petro at the rate it feels like accepting petro. The government’s promises to honor its debts already lack credibility, since it’s in default on outstanding bonds. What won’t happen is another of Maduro’s promises, to “advance a new form of international finance.” The petro is not innovative. If it is a cryptocurrency—early indications suggested it wasn’t, while subsequent descriptions are just confusing—it’s a worthless one. Bridging the gap between fiat currency and cryptocurrency, stablecoins aim to achieve stable price valuation using different working mechanisms.
His friends and family warned him that working with the regime could only end badly. The person overseeing the effort, Vice President Tareck El Aissami, had been called a “drug kingpin” by the U.S. government and would soon be named to a federal “Most Wanted” list. Mr. Jiménez acknowledged the danger, but he talked about the Petro as a Trojan horse that would sneak in the kind of reforms that he and the opposition had been dreaming about for years. “We must advance in these new economic and technological systems to be accessible,” Maiquetia airport director said. Full BioDavid Floyd is a reporter for Coindesk with 5+ years of experience as a freelance financial writer. While it was launched with great publicity, the Petro has not lived up to its hype, and critics and observers have questioned its validity.
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The idea for the petro came from Hugo Chavez, who had foreseen a “strong currency backed by raw materials”, according to the government’s white paper on the petro. The coin was supposed to represent a safe haven from the nearly-worthless bolivar, but also to help circumvent US sanctions. However, Petro, which was launched in 2018, failed to attract users as Venezuelans were more interested in Bitcoin and altcoins. The price of the petro on the secondary market has always been much lower and much more volatile—despite claims from Venezuela’s government that the petro is a stablecoin. “Valiu buys and sells bitcoin instead of directly exchanging pesos to bolivars because of the lack of availability of that currency in regulated marketplaces,” said Alejandro Machado, Valiu’s head of pilot programs. As promised, Mr. Jiménez presented his plans for the Petro in late December, at a daylong conference at the central bank that included a handful of American crypto experts.
Venezuela is in the midst of one of the largest economic disasters in recent history. Rampant inflation over 4000 percent in the past year, food and medical shortages, and political turmoil have left the country in a perilous state. In the midst of this crisis, the government has proclaimed its new cryptocurrency, the petro, as a digital alternative to their now close-to-worthless physical currency, the bolívar.
In December 2017, pursuant to Decree 3196, the Venezuelan government announced that it would create its own cryptocurrency—the petro—that could be issued, mined, and traded in Venezuela. The petro officially launched in February 2018, and the government intended for it to be backed by Venezuela’s oil and mineral reserves. However, in March 2018, the Asamblea Nacional declared the petro illegal and constitutional. Notwithstanding, President Nicolas Maduro declared that the petro would be used as legal tender in Venezuela; however, to date, no one appears to hold, trade, or accept the petro.
As Venezuela’s economy regresses, crypto fills the gaps
Looking composed despite the hour, in a blue suit and red tie, he announced that the government was about to make history by becoming the first on Earth to sell its own cryptocurrency. Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was updated, the author has no position in any cryptocurrency.
Maduro’s plan to revive Petro
The opposition-controlled National Assembly has opposed the idea of the petro, labelling it illegal. “Petro is born, and we are going to have a total success for the welfare of Venezuela,” President Nicolas Maduro said on Tuesday. According to Maduro, petro raised $735m in its first pre-sale day. With that said, the country capital’s Maiquetia Airport is still serviced by multiple companies, including Iberia, Panama’s Copa Airlines, Portugal’s TAP, Air France, and Air Europa. Even so, Venezuela does not offer direct flights to the US as a consequence of sanctions.
They are also flocking to stores that accept the crypto as they seek to dispose of it as quickly as they can. Bitcoin news portal providing breaking news, guides, price analysis about decentralized digital money & blockchain technology. Venezuela’s president, Nicolas Maduro, recently announced that he plans to revive the country’s oil-backed cryptocurrency Petro, which failed to attract users.
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He pulled out a black notebook, in which he was writing letters of apology to the friends he had lost. When his father reported to prison, Mr. Jiménez was left alone in a house owned by a friend. He slept in a child’s room, with Legos and dinosaurs at the foot of his bed. Without asylee status, he couldn’t work, so he sat in his apartment, playing games on his phone with the blinds down to avoid using electricity for air conditioning. Mr. Jiménez spent his days putting together an application for asylum. “I possess particularly features, as the creator of The Petro, that make me subject to persecution because the government wants to keep me quiet,” he wrote.
The U.S. Department of the Treasury has sanctioned a Moscow-based bank over its role in financing Venezuela’s controversial petro token. Cuba has announced it is considering the use of cryptocurrency in order to bolster its finances amid U.S.-led sanctions. Venezuela’s president has ordered his pet cryptocurrency, the petro, to be used in funding an ongoing housing initiative. Discussing new trials of an LN point-of-sale app; updates in consumer & institutional crypto derivatives, and Venezuelan petros as holiday bonuses.
Mr. Jiménez walked to the presidential palace, pushing his way through the crowds outside with a sense of exhaustion and dread. The U.S. government issued a $5 million bounty to the supervisor of the Petro, but court documents suggest that crypto has little to do with alleged sanction evasion schemes. Venezuelan mayors agreed to join the government’s plan to expand the adoption of Petro despite some municipalities not having the technology to handle it.
Tether is a stablecoin, a cryptocurrency pegged to and backed by fiat currencies like the U.S. dollar. The Petro is a controversial Venezuelan government-sponsored cryptocurrency introduced in 2017. Additional factors that cannot be determined are which entities are accessing the platforms and how cryptocurrency is being used. However, the analysts suggest that more than 50% of cryptocurrency transaction volume in Venezuela is from professionals and large and small retailers.
And yet Mr. Jiménez was pulled back into the program in a shambolic series of events. The government told his team that they would need to compete to have a role in the Petro’s launch — against a Russian group of murky origin. Mr. Jiménez’s employees could find no evidence that they had any significant cryptocurrency experience; Time magazine later advanced a theory that they represented a Kremlin effort to control the Petro. When the president gave Mr. Jiménez the floor, he went over the basics of the Petro, including an initial issuance of $200 million. Then the finance minister spoke up, and for the first time, Mr. Jiménez’s plans were challenged.
The announcement of the Petro received a mixed reaction in the cryptocurrency community. One of the major selling points for Bitcoin and other cryptocurrencies was decentralization; no single entity could control or censor blockchain transactions. Having a national government directly control a digital asset would go against the principles of the cryptocurrency movement. On 5 January 2018, Maduro announced that Venezuela would issue 100 million tokens of the petro, which would put the value of the entire issuance at just over $6 billion.
Oil prices had plunged, sending Mr. Maduro into a money-printing frenzy. As bolívars became worthless, medicine disappeared, refugees drowned and children starved. Mr. Jiménez was part of an educated class that was naturally drawn to the opposition. After college in Caracas, Mr. Jiménez spent a few years in the United States — studying, getting married and doing what he could to oppose Mr. Chávez and his successor, Mr. Maduro.
A few months earlier, the idea that Mr. Jiménez would be called before the tyrant who ruled Venezuela would have been unimaginable. Mr. Jiménez was just 27, ran a tiny start-up, and had spent years protesting the dictator. Mr. Maduro had not just mismanaged his country into financial crisis — he had detained, tortured and murdered those who challenged his power.
The world’s leading commodities—aside from gold—and stock markets also tanked in the midst of a panic spurred by the spread of the deadly coronavirus and a trade war between Russia and the Saudi Arabia-led OPEC. Yesterday, virtually every market that comprises the fundamental gears of the world economy woke up to heavy losses. “Nobody is going to tell you ‘every night when we do the books, we convert bolivars into bitcoin,’ but yes, this is happening.” The United States in 2019 imposed broad Venezuela sanctions that block U.S. citizens from dealing with Maduro’s government. While banks can still deal with private businesses or individuals, many avoid doing so due to perceived regulatory risk.
Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world’s media organizations, industry events and directly to consumers. Mining cryptocurrency – using high-powered computers to solve complex math problems – is an attractive way to make extra income thanks to Venezuela’s ultra-low power prices, but the average citizen cannot afford the equipment. It would have been reasonable at that point to assume that he was headed to prison, and that his role in the Petro was over.