Following news of President Nicolas Maduro’s apparent ouster from power after three turbulent years in charge of Venezuela, there are indications that the ascension of his U.S.-backed opposition challenger Juan Guaidó could spell the end for one of the world’s most curious cryptocurrency experiments.
The Petro has been the source of significant controversy, with Maduro once proclaiming it to be the future of Venezuela, and critics pointing out that it never appeared to actually become operational at any time. While President Maduro has consistently maintained that the economic future of the country was inextricably linked to the government-backed crypto project, some believed that the much-publicized Petro ICO was little more than a means of raising hard currency by a cash-starved regime in charge of a country with the world’s highest rate of hyperinflation.
Yesterday, US President Donald Trump took the unprecedented step of announcing official American recognition for Guaidó – a stance that was quickly adopted by major regional powers including Brazil Colombia and Canada. With the announcement of U.S. support for Guaidó come a few interesting scenarios for the Petro and cryptocurrency usage in Venezuela as a whole.
U.S. – Backed Government Would Spell the End for the Petro
If Guaidó is successful in his bid to conclusively unseat Maduro, the Petro is almost certainly doomed to obsolescence because from the onset, it has been opposed by American authorities. During the ICO, the US government announced that it was illegal for American citizens to invest in it, and in fact, there has never been any evidence that the Petro was listed by any reputable exchange.
The entire reason for the idea behind the Petro was that US sanctions had not only weakened Venezuela’s economy significantly, but they also left the country desperately short of much-needed hard currency, which in part was responsible for the world-leading hyperinflation figures. The Petro was supposed to provide a new source of foreign investment for Venezuela that would bypass the global financial system which falls under the jurisdiction of American authorities due to the dollar’s de-factor status as global trade and reserve currency.
A withdrawal of sanctions and normalization of economic ties would render the Petro superfluous, and American authorities would also be eager to get rid of a project which made a brief if an unsuccessful attempt at challenging America’s global financial hegemony.
Possible Impact on Crypto Adoption in Venezuela
While the Petro’s prognosis does not look good in the event that Maduro is unseated, the same cannot necessarily be said for cryptocurrency adoption in general. Venezuelans are already among the world’s most prolific peer-to-peer cryptocurrency traders, and even normalization of economic ties with the U.S. would not be enough to convince them to drop crypto for fiat.
For one thing, there is unlikely to be an influx of investment on anything close to the scale needed for a full-scale economic revamp. In the absence of such investment, Venezuela’s oil-dependent economy will remain largely unchanged for the majority of the people, which means that the methods of transaction and value transfer that they have picked up over the past couple of years will remain in place for quite some time to come.
Coingape reported recently that Dash has made significant inroads into Venezuela’s consumer markets, tying up deals with retailers and Kripto Mobile, a South American mobile phone manufacturer that sells phones pre-equipped with the Dash ecosystem. Such innovation is unlikely to stop unless Venezuela is literally deluged in a flood of American fiat money – which does not look to be on the cards.
Regardless of whether the Petro survives or dies, it no doubts will remain an interesting reference point in the evolution of cryptocurrencies, and it may, in fact, have already spawned successors in sanction-hit countries like Iran.
Coingape will bring more updates on the Venezuelan situation as it develops.
I am a busy writer and journalist with an interest in tech and finance. When I’m not writing and traveling around Africa, you can sometimes catch me in the writers room at ‘The Other News’, Nigeria’s weekly answer to ‘The Daily Show’ with nearly 2 million viewers. My work on ‘The Other News’ has been featured in the New Yorker Magazine. I have been nominated by the US State Department to take part in the 2019 Edward R. Murrow Program for journalists under the International Visitors Leadership Program.