Venezuelan President Nicholas Maduro is making a desperate bid to save the Organization of Petroleum Exporting Countries (OPEC) from the ash heap of history. He wants the organization to launch its own cryptocurrency.
“I am going to officially propose to all OPEC and non-OPEC producing countries that we adopt a joint cryptocurrency mechanism backed by oil,” Maduro told Venezuelan state radio on 6 February 2018. The utility token would be presumably linked to the Petro; the oil and natural resources backed Venezuelan initial currency offering (ICO), which Maduro proposed last month.
Venezuela is backing the Petro with around five billion barrels of oil, Al Jazeera reported. An ICO of 38.4 million Petros is scheduled for 20 February 2018. Since the OPEC basket price for oil was $64.83 a barrel on 8 February 2018 – the oil backing the Petro was worth around $324.15 billion on that day.
The Petro is a “pre-mined” cryptocurrency so only the Venezuela government can release more. The Petro will be sold on exchanges for other cryptocurrencies and Venezuela’s currency – the Bolivar, Al Jazeera reported.
Since Maduro presumably controls Bolivar creation, he and his friends would be in a position to issue unlimited numbers of Bolivars and convert them to Petros. Giving them the opportunity to sell a huge volume of the cryptocurrency – and make vast amounts of money.
Is Petro Cryptocurrency or Debt, and will Cryptocurrency Owners be sued for it?
U.S. residents will not be able to buy it because the U.S. Treasury Department considers the Petro an illegal effort to circumvent American sanctions on Venezuela. Treasury is trying to shut the Petro down because it considers the altcoin an illegal effort to issue debt.
“The Petro digital currency would appear to be an extension of credit to the Venezuelan government … [and] could, therefore, expose US persons to legal risk,” a US Treasury spokesman told Reuters in January.
Maduro is attempting to circumvent the regular international markets for credit because Venezuela lacks the money to participate in them. Venezuela owed around $60 billion to bondholders but only had $9.6 billion in the bank in November 2017, CNN Money reported. One use of the Petro would presumably be to pay off those debts.
Residents of nations like the United States, the United Kingdom, and India; which have real court systems, can be sued by Venezuela’s creditors if they bought Petros. Those companies might end up with the Petros, and the Venezuelan people would not see a dime of the cryptocurrency bonanza.
Ironically enough, one of the creditors that might go after the Petros is De La Rue (OTC: DLUEY) – the historic British company that prints the Bolivars. Back in April 2016, Bloomberg reported that the Central Bank of Venezuela owed Del La Rue $71 million in unpaid printing bills.
America would own the OPEC Cryptocurrency
Strangely enough; the country Maduro hates most the United States, would be in a position to dominate the OPEC cryptocurrency. In his radio statement, Maduro invited all “non-OPEC oil-producing nations” to participate in the OPEC altcoin.
The United States was the world’s second-largest oil producer in 2017, the Daily Records reported. The International Energy Agency (IDEA) predicted that the USA will become the world’s largest oil producer in 2018, CNBC reported.
If those predictions are correct the United States would be in a position to dominate the market for the OPEC cryptocurrency because it would be the world’s largest non-OPEC producing country. The USA or American oil companies might be able to simply buy up all the OPEC coins.
Is Cryptocurrency Maduro’s Exit Strategy?
That is either a dumb or very smart move on Maduro’s part. If his plan is to increase the influence and income of oil-producing nations it is stupid. If Maduro’s goal is to sell lots of oil to finance his retirement on the French Riviera it would a great plan.
Not coincidently, Maduro’s move comes at the same time that speculation the US would back a military coup to remove the Venezuelan president is appearing in some media outlets. The Havana Times and Venezuelan Defence Minister Vladimir Padrino construed remarks made by U.S. Secretary of State Rex Tillerson as inviting such a coup. No hard evidence to validate such claims was presented.
Maduro is looking less and like the Marxist revolutionary, he claims to be each day. Instead, he’s acting like a con artist trying to cash out of his scam.
Venezuela’s Incredible Hyperinflation
It is easy to see why Maduro would seek an exit strategy; his nation’s economy is sinking to new depths as hyperinflation spirals out of control.
Venezuela’s inflation rate might be as high as 12,875%, John Hopkins University economist Steve Hanke told The Economist. Hanke estimated that prices in Venezuela are doubling every 52 days.
The International Monetary Fund forecast that Venezuela’s inflation rate will rise above 13,000% in 2018, The Economist reported. That inflation rate is dragging Venezuela’s currency the Bolivar straight into the toilet. This is truly an insult to the great man whom the currency is named for – South American liberator Simon Bolivar.
The Venezuelan government is now printing a 100,000 Bolivar bill, The Economist reported. That bill might be worth less than 50¢ (£0.36) in US dollars. The black market exchange rate for one US dollar (£0.72) in Venezuela is 228,000 Bolivars, Reuters reported.
Eggs are Money in Venezuela
Hyperinflation has forced many average Venezuelans to turn to a new unit of exchange the egg.
A fresh egg now costs around 10,000 Bolivars; a day’s pay under the minimum wage, in Venezuela, The Havana Times reported. If this is true, a day’s “salary” under the minimum wage is netting a worker around 1¢ under the exchange rate uncovered by Reuters.
Many Venezuelans are now using eggs to pay for things like taxi rides, The Havana Times noted. Eggs, unlike the Bolivar, have real value, because you can actually eat them in a country suffering from a food shortage.
Cryptocurrency to the Rescue
Thousands of Venezuelans have found an alternative to the Bolivar; and the egg economy, mining cryptocurrency.
A person was able to earn $500 (£359.56, 6.1 BTC, or 125.4 million Bolivars) a month mining Bitcoin (BTC) in Venezuela in September 2017, The Atlantic reported. With those profits, even the police started cryptocurrency mining. When Maduro launched a crackdown on mining, crooked cops seized mining rigs from citizens and set them up in police stations in order to cash in.
Strangely enough, Maduro’s hyperinflation has turned Venezuela into a laboratory for experimenting with cutting-edge capitalism and payment technologies. One has to wonder how long the experiment will last, and if the unwilling participants in that experiment will one day put the mad economist responsible for it Dr. Maduro before a firing squad?