Some countries that are struggling economically have adopted the view that crypto economy will come to their rescue. Chief among them is Venezuela which last month launched a national cryptocurrency known as Petro (PTR). After the launch the president of Venezuela claimed that the virtual currency had raised $735 million. The claims were however unverifiable but the South American country still managed to make history as the first nation state in the world to have a cryptocurrency.
The price of the Petro was pegged to oil and this made the crypto too expensive for many Venezuelans especially given the high unemployment rate there and the generally poor economic conditions. According to the Human Rights Watch, the average citizen in the oil-rich country can barely afford to buy food. The economic plight has also forced many Venezuelans to flee their country in the past couple of years.
Sovereign bond issue
Since the Bolivar, the national currency of Venezuela, is considered useless the government has ordered all enterprises that are controlled by the state such as PdVSA, an oil major, to accept payments in the virtual currency. Since the oil company is owned by the government it translates to mean that the transactions would be intra-government. The only time value would be created would be if a customer of PdVSA bought oil using the cryptocurrency and paid for the oil that way. Under the current circumstances the Petro is looking more like a sovereign bond issue but in a new form since Venezuelan sovereign bond issues as they have traditionally been known are under sanctions from the United States government.
It is however unclear if the national cryptocurrency will assist Venezuela in avoiding default by making late payments for the oil major?s bonds. This is especially so since the U.S. government has issued an order banning citizens and residents of the United States from participating in transactions that have anything to do with tokens associated with the Venezuelan government.
Iran and Turkey
In the event that the national cryptocurrency is able to save Venezuela from the economic problems the country is facing, other countries that are under sanctions could also be tempted to follow suit. Recently the technology minister of Iran, Mohammed-Javad Azari Jahromi indicated that the country?s central bank was considered issuing digital coins.
Turkey has also expressed admiration for what has happened in Venezuela. The rulling party of the European country, Justice and Development Part as well as the Nationalist Movement Party, its coalition partner have held talks with a view to launching a digital coin.
While Venezuela may have been the first country in the world to unveil a national digital coin, the South American country certainly wasn?t the first to come up with the idea. Abkhazia, a breakaway republic which was once part of Georgia, has been considering the idea with a view to funding its government and reduce dependence on Russia. If and when it finally does it might work since issuing digital tokens may present a short-term solution as speculators are likely to scoop up the coins expecting quick returns.
Dippli is an independent media outlet that covers the current events in the crypto space. Got breaking news or a story to share? Then feel free to contact us at firstname.lastname@example.org.