The Venezuelan government through their Sunday Tv Program with president Maduro announced on December 3rd the creation of its own cryptocurrency: the “Petrocoin”. With this announcement, the Venezuelan government has become the first country to announce the creation of its own Cryptocurrency as a financial measure and valid method of payment for international investments and natural resources of Venezuela. The sustainability of this coin will depend on the current gold and natural resources reservations, according to the announcement of President Maduro. Other countries have made the announcement about creating their own cryptocurrency, such as the Russian Government with the “Cryptoruble” and the Central Bank of India, but their intention was to regulate cryptocurrency transactions and at the same time study the creation of their own cryptocurrency.
(Nicolas Maduro on his live TV program, source: Venezolana de Television VTV)
During this transmission, President Maduro said:
“This is something transcendental (…) I have studied this topic in depth and I want to announce that Venezuela has to implement a new cryptocurrency system based on our oil reserves. Venezuela is going to create a cryptocurrency, the Petrocoin (…) to progress in the matter of monetary sovereignty, make financial transactions and overcome the financial blockade … “
Nicolás Maduro Moros.
Venezuelan President.
In addition, the President of Venezuela ratified the creation of the “Venezuelan Blockchain Observatory” conformed by a multidisciplinary team (technological, legal, economic, among others) of about 50 people.
“The new system of financing and economic support will be made with the creation of a cryptocurrency (Petrocoin) backed by reserves of the Venezuelan wealth: gold, oil, gas and diamond.”
Nicolás Maduro Moros.
Venezuelan President.
It should be noted that since 2014, Venezuela is experiencing a strong social, political and financial crisis due to political and institutional conflicts, strong economic controls, exchange control and the decline of oil production and prices, which the country depends for at least 95% of its foreign exchange incomes. This situation combines with an estimated inflation of 2.300% for 2018, one of the highest in the world. In addition, it must be added that the United States Government and other countries have blocked the financial transactions of the Venezuelan Government along with its main state subsidiaries (such as the PDVSA company) and key Venezuelan government officials. This sanctions came as a result of accusations of drug trafficking and human rights violations from the Venezuelan Government.
In this sense, the government of Venezuela seeks an exit through Blockchain and their new cryptocurrency idea “Petrocoin” to not have to depend on the financial system of the United States of America and the other countries that support them.
Although it seems like a progressive move, this idea cannot be sustained as established by the Venezuelan Government. A cryptocoin cannot be guaranteed with natural resources, the price would not be set by market transactions but by an individual instead, making this specific coin a complete stranger to the regular models of price determination we’ve seen in cryptocurrency.
