From Bolivar to Petro: How Much Can Venezuela Shift From Fiat to Crypto?
Venezuelan President Nicolas Maduro is calling upon his citizens and state-owned businesses to use the Petro
President Maduro Is Ordering Companies to Use the Petro
Venezuela officially has its own cryptocurrency, the Petro – backed by oil. And now, Venezuelan President Nicolas Maduro wants his citizens and state-owned businesses to use it. To that end, he has been ordering companies to use cryptocurrencies for payments. “I order the payment of consular services in all embassies and consulates of the Bolivarian Republic of Venezuela in the world, [and] all consular services in the country, in the petro currency or in any cryptocurrency,” said Maduro.
The list of companies that have been instructed by the President to realize a percentage of their purchases and sales in the Petro include:
- Oil and natural gas company Petróleos de Venezuela (PDVSA)
- Its petrochemical subsidiary, Pequiven
- Decentralized conglomerate Corporacion Venezolana de Guyana (CVG), whose subsidiaries include aluminum and gold producers
Calling Upon the Venezuelan Population
While calling upon the population of Venezuela to help make the Petro a success, he also announced that citizens of the country will be able to use the Petro to pay for fuel, airline and tourism services. A new gasoline service has been announced at the border, which will charge for Venezuelan fuel in Petro. This is also an attempt to combat the smuggling of gasoline across the border.
“The National Association of Airlines will be able to pay in petro or in any cryptocurrency [for] the fuel and the services associated to the airlines in the rendering of their services in Venezuela,” announced Maduro. The government has already previously given its word to accept national taxes, fees, and other public services in Petro. Maduro’s vision for the use of his national crypto even stretches out to tourist services, including service providers, hotels, inns, national and international tourist services, who he says have been approaching him for authorization.
Can the Petro Help Restore the Venezuelan Economy?
The Venezuelan economy is in need of immediate restoration. The country is experiencing hyperinflation to the tune of 741% (YoY in Feb 2018), which has led its fiat currency, the Bolivar to lose 96% of its value. 10-year bond yields for the country’s bonds were 10.43% on February 21st, indicating the poor credibility of the nation.
Meanwhile, Maduro has already hinted at the launch of a Petro Oro – another Venezuelan cryptocurrency – this one backed by gold; next week.
Can Cryptocurrency Really Replace Fiat to Provide a Financial Base for Venezuelan Trade?
Both the initiatives, the Petro and the Petro Oro, are directed towards providing the economy with the necessary strength from the world of cryptocurrencies. It could help Venezuela tackle the economic blockade imposed by the U.S., the European Union (EU) and its regional allies. President Maduro sees it as an alternative world which could enable Venezuela to break the financial blockade and to create a solid monetary and financial base for the creation of powerful intra-regional trade networks.
The key question remains: With Venezuela’s fiat currency having lost much of its value, what would build investor trust in the Petro?