Venezuela Seeks to Launch Crypto Backed by Oil, Gold and Diamonds

In an ambitious attempt to right its finances, Venezuela’s president sees launching an oil-backed crypt as a solution.

Venezuela may have found the answer to its fiscal woes – cryptocurrency.

Nicolas Maduro, the president of the cash-strapped South American country, made the announcement Sunday. Called the Petro, his plans call for the crypto to be backed by the country’s oil, gas, gold and diamond riches.

For years now, Venezuela’s economy has been in shambles. We told you in October about Venezuela going down a spiral to becoming a failed state, and how it had turned to cryptos for solutions.

Observers note that it isn’t surprising that the country would seek to back a crypto with its oil because the commodity has historically contributed to its wealth.

However, oil price declines have hurt the country’s economy, and have taken a severe toll on its citizens. 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 Guardian reports that Venezuela’s currency problems have grown so dire that ATMs now provide a daily limit of 10,000 bolívars, which is barely enough to a few cups of coffee. The media outlet says that Black-market money changers charge commissions of up to 20% to score paper money for small business people who pay their workers in cash. Even banks are barely functioning, with them reportedly running out of banknotes.

Can crypto save the country?

When crypto naysayers speak of why they don’t believe in digital tokens like Bitcoin, they are quick to link them to something nefarious, and Venezuela usually comes up. For example, in a rant against Bitcoin, JP Morgan CEO Jamie Dimon limited the users of the currency to those in North Korea, Venezuela, and to those who are murderers and drug dealers.

No matter, Venezuela’s president sees hope in cryptocurrencies being a solution to right country’s financial ship. On Sunday, Madura is reported as saying his proposed crypto would allow Venezuela "to advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”

In October, the Central Bank of Venezuela convened a symposium of Blockchain experts to gather expertise on jump-starting the country’s economy. As the country slid into disarray, the unofficial information held that one bolivar would trade for one Satoshi, 100-millionth part of a Bitcoin.