Venezuela’s Crypto Push: Salvation or Scam?

Venezuela Rolls the Dice

Intriguing news is afoot for the nation of Venezuela, currently reeling from some of the worst inflation in economic history. The Venezuelan National Constituent Assembly is floating the idea of a Central Bank for cryptocurrencies through a reform of the country’s constitution.  While this is not the first time Venezuela has been in the news for cryptocurrencies, this latest development certainly has enormous implications on the South American nation’s ailing economy.

This is not the first time Venezuela has entered the cryptocurrency realm. Petro, a cryptocurrency tied to Venezuela’s massive oil, gas, gold and diamond resources, has turned heads in the global trading community. Some have accused it of being a rearranging of deckchairs on the Titanic at best, an outright scam at worst. Others accused the project of skirting sanctions imposed by the US and the EU, which in turn would reduce the country’s recent hyperinflation problem. The project has been heavily criticized by the global community, with the US reportedly banning the purchase of Petro tokens by American citizens.

Herman Escarra, a member of the Venezuelan National Constituent Assembly, has revealed critical details about the nation’s upcoming plans regarding cryptocurrencies. According to his statement, “The National Constituent Assembly of Venezuela … is preparing a reform to the Constitution that would include a central bank for crypto-assets and a superior court to the Supreme Court of Justice.”

In another statement, he revealed plans for developing a “central bank for cryptos” with a special court allocated to it which is to remain above the country’s Supreme Court rulings. The Venezuelan Government has received strong criticism for its recent actions, including the formation of a constituent assembly to replace the country’s 1999 constitution.  The plan was drafted in May last year, with opposition activists denouncing it as unconstitutional.

Venezuekan Bolivar
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Currently worth less than a millionth of its original value. Image credit: David Holt, Wikimedia Commons.

Implications for Venezuela’s Economy

According to a June 2018 report in the Guardian, the situation in Venezuela is worsening as the country was near the one million percent inflation mark. The country’s official currency the Bolivar has suffered devaluation beyond comprehension, reaching a historic low in the world economy.  A report by the International Monetary Fund indicated that the country is heading for an inflation disaster, akin to past financial collapses in Zimbabwe and Germany after the First World War. A raft of crippling sanctions imposed on the nation by the United States and the European Union has exacerbated the situation.

Opinions are split on the concept of an official cryptocurrency and the formation of a special crypto central bank. President Maduro has granted Petro official currency status alongside newly introduced “Sovereign Bolivar” notes, and while supporters argue that this last development would bring a substantial and much-needed improvement with respect to wages and income of workers, many forecast a worsening of the oil-rich nation’s grapples with hyperinflation.

The dire reputation of the Venezuelan government in the global community adds fuel to the critical fires.  Rating site ICOindex.com issued a scam warning against the Petro cryptocurrency, citing lack of transparency as the main reason. Industry experts and blockchain enthusiasts may be hoping that the success of Venezuela’s latest development will open the door for many other national governments’ taking notice of cryptocurrencies and their massive potential on the global stage, but they should prepare for their prayers to go unheard.

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Kaustav Das
Kaustav Das is a staff writer for Block Telegraph. He has been a tech journalist since 2016 and covers blockchain and cryptocurrency related topics on a daily basis.

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