Virtual currencies were conceived as a tool for the underdog. Venezuela’s leaders are hoping to buy some independence with theirs, says Brett Scott
31 October 2018
By Brett Scott
VENEZUELA is caught in a triple-pinch. Oil production is falling, hyperinflation is undermining its currency, the bolivar, and foreign reserves to pay for imports are dwindling. Against this backdrop, President Nicolás Maduro went on TV last month to encourage citizens to invest in the petro, a national cryptocurrency launched in February. Can it succeed where the bolivar has failed?
Venezuela needs to raise US dollars, but is frozen out of international financial markets after defaulting on its loans. Its answer, it seems, is to mint petro tokens and sell them in exchange for foreign currency. Maduro claims they are like an “oil voucher”, representing oil from a particular region. This way the petro, notionally backed by real resources and foreign reserves, can be linked to the bolivar, arresting its slide.
The crypto community already has a reputation for harbouring opportunists. It is common practice for them to generate tokens, give them a catchy name, and then try to sell them for dollars. If anything, Maduro is just following a well-established formula. Holding a petro seems not to give the holder the right to redeem it for either oil or oil revenues, which suggests Maduro’s link between the petro and oil exists in words alone.
“The libertarian core of the crypto community has been riled by this state-controlled cryptocurrency”
The libertarian core of the crypto community has been riled by this state-controlled cryptocurrency. But they are prone to seeing the world as a battle between two monolithic forces – states and markets – and they fail to recognise that not all states are equal. Countries like Venezuela occupy the lower rungs of the world’s geopolitical hierarchy. They are supposed to play nicely within the global financial system and produce oil for the advanced nations. Maduro and former president Hugo Chavez have refused to play along.
Post-colonial governments have long tried to achieve financial independence from neo-imperialist powers, but doing so invites sanctions and attempts at regime change. Cryptocurrencies were explicitly intended to free the underdog from the influence of big banks. Venezuela is hoping the petro can make that promise a reality.
This article appeared in print under the headline “Petro dollars”
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