Venezuela’s economy has continued to deteriorate, to the point of collapse as many of its people have fled to neighbouring countries like Brazil. The situation for its people is growing increasingly dangerous, as 85% of necessary medical supplies, along with medical professionals have diminished and left.
Its currency has now undergone monumental hyperinflation, nearing 8,000% with few smart ideas coming from the administration as to how to fix it. In the words of Forbes magazine’s Simon Constable, they demonstrate a ‘Special kind of Stupid‘. From cutting zeroes off the native Bolivars, to the rollout of its cryptocurrency: the Petro.
While the former has holes in it as a remedy to hyperinflation. The Petro has had more poked through it since its ICO entered the market on the 20th March. As an ICO, it’s ratings alongside contemporaries are terrible; garnering a 4.5 rating compared to an average range of 8.0-9.7. But what is it that’s dragging the Petro down? And What’s the risk behind it?
Dry Cleaning Crypto?
The reputation and legitimacy of any government are placed on its conduct towards its economy. And, unfortunately for the Venezuelan Socialist government, it’s a reputation that has been profoundly damaged. According to Reuters, more than 50 of its nationals, including major political figures such as President Maduro and his second in command, Diosdado Cabello have been implicated in money laundering.
The irony lies in the fact that the now sitting socialist government has, for decades, vowed to combat corruption. Only to have its leading members and representatives not combatting, but participating in it.
So where does the Petro come into this? Political opponents and external powers have, for a while, railed against the administration for corruption. And with an ICO being announced, opponents see this as another avenue for the government to conduct illicit activities under the guise of Oil-Backed crypto.
Rafael Guzmán, acting president of the country’s finance committee, has slammed its sale as a non-solution:
“This deepens the crisis that we are living in. The PTR is another [example] of corruption, and we will come out of this crisis with measures that we have announced from this Parliament.”
Coin Exchanges are already turning their backs on it
According to Live Bitcoin News, the popular coin exchange Bitfinex has refused to list the Petro as an ICO. This refusal is due to one of the controversies which do envelop the Petro. It’s the suspicion of Bitfinex that the Oil-Backed crypto will be used in order to work around International sanctions.
According to the company’s statement, the US’ ban on any citizens from paying into the ICO means the Bitfinex’s hands are tied. But this move could set a precedent for other exchanges to follow, especially due to the dent in the reputation of coin exchanges this first quarter.
Fraud from the offset
President of Venezuela, Nicholas Maduro, has acted to erode the already fragmenting credibility of the Petro after his comments on the ICO. CCN reports that the socialist president stated that the offering would see over $5 billion could be raised from amongst investors.
This statement has since been uncovered as false, as that amount goes beyond the value ($60) and the number of tokens available for sale (38,400,000). The figure and value would put the maximum amount possible to raise at $2.3 billion, less than half of Maduro’s inflated statement.
Concerns are still rife as to the use of the petro and money after it’s been successfully raised. While it’s already brought in $735 million, suspicion continues to blanket the crypto as it enters its second week on the market.