Ready, Set, Go; Venezuela Moving Forward with Crypto Presale Despite Many Warnings
Venezuela is readying to sell its Petro digital currency, as leaders remain oblivious to the many warnings that this is a very bad idea.
It’s like talking to a brick wall when it comes to trying to get Venezuela’s president to not move forward with the creation of the country’s own cryptocurrency.
Despite warnings, Nicolas Maduro is still readying the presale of a crypto he’s named Petro.
Here, we’ll discuss these warnings as the country readies for the sale to begin tomorrow, Feb. 20.
Maduro sees creating the digital token as a way to help right the country’s financial ship. Despite having more oil reserves than any other country in the world, the Venezuela, and its estimated 30 million residents, is nearing financial ruin.
A quick scan of recent headlines about the country’s fiscal problems tells it all:
“Half the Venezuelan economy has disappeared”
“Venezuela Calls For Presidential Election Amid Worsening Economic Crisis”
“Venezuela's Health Care System Ready To Collapse Amid Economic Crisis”
“Venezuela crisis: How the collapsing economy is causing desperate parents to give up their children at orphanages”
“Venezuela oil production is plummeting…main source of cash is dwindling at a breathtaking pace”
Petro to the rescue
Maduro started bandying about the idea of Petro last year. He’s said that his proposed crypto would allow Venezuela "to advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”
He’s planning to back the crypto with revenue from country’s oil, which is dwindling.
However, given the country’s extreme financial situation, it baffles observers for many reasons, including these revenues dwindling at a breathtaking pace.
Who’d want to buy this considering this challenge?
Venezuela shouldn’t count on any investors from the U.S. Officials have sounded the warning bell about the sanctions it’s slapped on the country that mark such investments as off limits.
Specifically, the U.S. Treasury Department warned in January that Venezuela’s proposed petro cryptocurrency could violate sanctions. The Treasury sees the petro as an extension of credit to the Venezuelan government. Because of that, it could expose U.S. citizens to legal risks.
“(It) is another attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.”
That comment came on the heels of the Venezuelan parliament rejecting the crypto idea.
Whether the country’s leaders are oblivious to these warnings, or simply do not care, the sale is moving forward.
Carlos Vargas, Venezuela's Cryptocurrency Superintendent, reportedly said over the weekend:
“On Tuesday, there will be quite a few announcements about the start of the process. And there will surely be a lot of investors from Qatar, Turkey and other parts of the Middle East, though Europeans and Americans will also participate.”
Again, the U.S. has steadfastly warned that U.S. participants will face issues if they invest in this Petro.
Facing ruin brought on by its own actions
How could a country that is home to the most valuable commodity on the planet fall into such dire financial straits?
For one, almost all the country’s revenue comes from oil sales. The problem is that it’s been eroding that revenue stream by selling and pumping fewer barrels of oil for years. In addition to the revenue declines that stem from the falling oil prices, the country has also seen its currency, the bolivar, lose value.
The oil production erosion issue is aggravated by the South American country being under heavy economic sanctions by the U.S. and the European Union. The situation could get worse before it gets better.
The United States is threatening to ban the country’s oil imports, which would further cripple Venezuela’s economy. U.S. Secretary of State Rex Tillerson said the following recently:
"Obviously sanctioning the oil, or in effect prohibiting the oil to be sold in the U.S. is something we continue to consider.”
The logic is that by doing so, Maduro will feel the pressure to restore the country’s Constitution and hold free and fair elections. Last year, the Economist Intelligence Unit's Democracy Index downgraded Venezuela from a "hybrid regime" to an "authoritarian regime" because it continues to slide toward being a dictatorship.
Plans call for roughly 38 million Petros to be sold with a face value of roughly $2.3 billion in private placements. They were originally to be sold starting on Feb. 15. Plans also call for another 44 million petros with a face value of $2.7 billion to be offered to the public. That offering could come in March.
We’ll let you know how all this pans out on Tuesday.