Venezuela announces its own cryptocurrency

Despite the optimisim of President Maduro, critics say that it is unlikely this new currency will have any real effect on the nation's prosperity.

President Maduro
Porlamar/Venezuela. 17/09/2016: Venezuelan President Nicolas Maduro before the opening ceremony at the Non-Aligned Movement summit in Porlamar Margarita Island Venezuela. Photo: Golden Brown, Bigstock

Amidst the sudden and dramatic rise of Bitcoin’s trade value, Venezuela has declared its own plans to launch a cryptocurrency known as the “Petro”.

The collapsing economy of Venezuela has had no signs of recovering in the wake of US-led economic sanctions against the country.

The Venezuelan president Nicolas Maduro was met with cheers from supporters as he declared the coming of the 21st century as the new digital currency was announced. While offering few specifics on how the feat would be achieved, Maduro said that this would be the solution to the nation’s economic collapse which was the result of what he referred to as a US blockade.

Maduro stated during his regular TV broadcast that the new cryptocurrency would be supported by oil, gas, gold and diamond reserves.

Opposition leaders were quick to criticise the move declaring that it was not a real solution to the nation’s economic woes and that it would need congressional approval to become a reality.

Venezuela’s regular currency, the bolivar, has fallen drastically in value and the country is distinctly lacking food and medical supplies.

Regardless of the plausibility of this new cryptocurrency, this move highlights the impact the United States’ sanctions have had on Venezuela. Ever since the sanctions came into place earlier this year the country has had increasing trouble moving money through international banks.

The announcement of the Petro has baffled some cryptocurrency experts since cryptocurrencies are not usually backed by governments or banks. Many technically able Venezuelans have used cryptocurrencies like Bitcoin to bypass currency controls in the nation so that they can make overseas investments and purchases.

Opposition leaders as well as economic critics have responded to this move as being both irrational and irresponsible. Maduro is suspected of trying to use this new currency to pay off bondholders and foreign creditors in a desperate attempt to restructure Venezuela’s debt.

Maduro claims he is simply combating a US-led conspiracy to topple his government and sabotage socialism in Latin America.

Currency controls and overprinting of the bolivar have led to a dramatic decrease in the economic wealth of the country. The monthly minimum wage is now estimated at an astonishingly low $4.30.

No matter how the new currency pans out, it is unlikely to bring any immediate relief to the millions of Venezuelans who have been thrust into poverty this year.

Venezuela owes an estimated 140 billion dollars to overseas creditors. With a dropping oil price and US sanctions it is unlikely this new miracle currency will give Venezuela the economic breathing room it desperately needs.