Venezuela Plans to Have a New Currency Backed by Petro

Venezuela’s economic landscape after Hugo Chavez passed away is a disaster. Currently, Venezuela has been suffering from hyperinflation. While dealing with 1,000,000{4ede17fdd9b4ce8121d01fc4b54913fe84f8215aace504cc657695cefb5329ff} inflation rate, the Maduro regime has no other choice but to think outside the box. Venezuela came up with an idea to have a cryptocurrency that is backed by the country’s oil.

Its goal is to be able to transact with other countries despite existing sanctions. The good news is that Venezuela isn’t the only country that has done this. Iran has utilized blockchain technology in order to fight possible US sanctions now that the Trump administration has walked out of the nuclear accord that was made during the Obama regime.

Since it is using blockchain technology, Venezuela aims to alleviate the economic problems worsened by these sanctions spearheaded by the US. And in recent months, we’ve seen the growth in the popularity of cryptocurrencies in Venezuela. Dash has become popular in Venezuela. There are a number of businesses today that is already accepting Dash.

In addition to this, there are also those that are doing their mining operations taking advantage of the price cap on basic commodities such as electricity and water. Venezuelan government even responded by banning crypto mining hardware since there are those who are looking to simply use US dollars than Venezuela’s current fiat currency.

Currency Tied to a Crypto

And because of Venezuela’s problem with inflation, Venezuela announced a new national currency that is going to be tied to the Petro. It is expected to circulate by August 20, 2018. Bolivar Soberano or sovereign bolivar will replace the current Bolivar Fuerte. This is going to be part of the Economic Prosperity Recovery Program that will also begin on the said date.

The thing with this announcement is that it isn’t even going to be a fiat currency considering that it is going to be tied to the Petro which is a digital currency. Petro is then tied to oil.

The new currency will have five fewer zeroes than the current bills. Also, in order to help boost the economy, Venezuelan President Maduro has ordered that the taxes on duties and importation of raw goods are removed.

One Petro is to One Barrel of Oil

According to reports, the supposed value of one Petro is one barrel of Venezuelan oil. However, Petro’s value has been recorded at less than one cent. According to Maduro, “The petro is going to undoubtedly make one of the stabilizing columns of the Venezuelan economy”.

The reality is that this is no longer new. There are governments that have relied on creating a new currency in order to fight hyperinflation. However, the likes of Weimar Germany created a new currency that has been tied to a commodity. And for this reason, there are people who are skeptical regarding the usefulness of Petro.

Even in Venezuela, there are lawmakers that have called the cryptocurrency illegal. They claim that Petro isn’t even going to be honored once Maduro steps out of the office.

Can Petro help Venezuela recover economically at this point? Is this the answer that the Maduro regime is looking for?