Venezuelan President Nicolás Maduro has ordered that his newly-created Petro cryptocurrency to be made the nation’s second official currency in the face of hyperinflation and international sanctions that have afflicted the beleaguered nation.
During a televised address on Tuesday, Maduro has stated that the mandate will officially take effect on August 20 when the “sovereign Bolivar” will be joined by the Petro. In efforts to battle massive inflation, the move is slated to remove five zeroes from the national currency.
Just last month, the International Monetary Fund (IMF) has warned of a possible economic “collapse” in Venezuela. The IMF has also projected an inflation rate of 1,000,000% by the end of the year and a drop in the country’s GDP of 18%. The IMF states that Venezuela’s current condition may be compared to that of Germany during the Weimar Republic or the Zimbabwe crisis at the end of the previous decade.
The figures will set the price of a cup of coffee in Venezuela, which is worth 450 Bolivars, to one million today. This also means that one million Bolivars will be equivalent to about 30 American cents.
In his public address, Maduro states:
“As of next Monday, Venezuela will have a second accounting unit based on […] the value of the Petro. It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”
The Venezuelan president also confirms that the valuations of each currency will come from the country’s central bank, the Banco Central de Venezuela (BCV). Maduro also insinuates the development of a new salary system for paying wages utilizing Petro, alongside new pricing guidelines for goods and services. However, the president fails to provide any concrete details about the move in his address. The Petro will be utilized by the state oil industry, which will also be pegged to the “sovereign Bolivar.” This indicates that the Petro will serve as some sort of a stablecoin for Venezuela.
Maduro also boast:
“Venezuela is going to have a real official marker […] so that the speculation with the Venezuelan currency is over.”
Somewhat of a pet project for Maduro, the Petro has been reportedly created to circumvent severe international sanctions imposed on his country.
There have also been reports that the Petro has been developed in part by Russian officials, bankers, and businessmen. Rumor has it that Russia and Venezuela wanted to use cryptocurrency as an experiment in evading U.S. sanctions imposed on the two countries.
Convinced that the Petro is simply an extension of credit to the Venezuelan government, U.S. President Donald Trump in April issued an order banning U.S. citizens from transacting in Petro. The U.S. Treasury Department has even labeled it:
“Another attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.”