Two years ago, Venezuela issued its own digital currency, the Petro. The move was less inspired by modernization than by the need to circumvent U.S. sanctions against Maduro’s regime. Backed by the South American nation’s abundant oil reserves, the cryptocurrency is pegged to Venezuelan oil prices. But despite the infamous leader’s bombastic announcement, we have heard little about the Petro since 2018.
Now, President Maduro says he plans to digitize Venezuela's entire economy, getting rid of physical cash altogether. According to government sources, this would help the devastated socialist country to deal with the scourge of hyperinflation, which has driven millions of Venezuelans away from their homeland.
Maduro said in a speech that his nation's physical currency was under attack. "We are moving this year to a more profound digital economy, in expansion,” he announced. “I’ve set the goal of an economy that’s 100% digital."
According to Maduro, debit cards dominate Venezuela’s financial operations, where only 3.4% of transactions involve physical cash changing hands. The amount appears all the more insignificant considering public transport in the Bolivarian Republic is paid in cash.
Over the last three years, Venezuela's physical currency has lost 99% of its value. In 2020, inflation soared to a shocking 5,790%. Monetary policies designed to solve the crisis have failed miserably, and going digital seems to be Maduro's last resort.
US sanctions have exacerbated the Venezuelan crisis. The government's coffers hit rock bottom when Britain blocked access to the Latin American nation's gold reserves, which are deposited in London. While the Petro was supposed to offer some relief for Venezuela's economy, that has not been the case. In 2018, Maduro’s regime reported that the Petro's ICO had attracted over $3 billion from cryptocurrency investors, but he offered little proof, and the international community remains skeptical.
In September 2020, the Venezuelan government said it would resort to “Petro and other cryptocurrencies, national and global” to circumvent U.S. sanctions “in domestic and foreign trade, so that all cryptocurrencies of the world, state and private, could be used."
Petro is currently not available on international exchanges, and the Treasury Department has warned U.S. investors that purchasing the cryptocurrency may incur violations of sanctions against Venezuela.