What has changed in Venezuela since the launch of national cryptocurrencies El Petro?
In the first quarter of 2018 actively discussed the introduction of a national cryptocurrency. Launch of digital currency secured by diamonds, announced the Israel diamond exchange. Russia thought, as it is advisable to work on the issue of “scriptorama”. The establishment of a national cryptocurrency is considered and Turkey. The first one was Venezuela in February 2018 appeared national cryptocurrency El Petro. As stated by the President of this country, the first day of sales has collected $735 million. The idea of launching a national digital currency seemed like a good idea, capable of leading the country out of deep crisis. What has changed over half of the El Petro? As a national cryptocurrency has affected the economic and political situation in Venezuela?
The purpose of the establishment El Petro
The main problems of Venezuela hyperinflation and the damage of U.S. sanctions. This has led to the depreciation of the local currency of that country, Bolivar. The main income of the country – oil exports, which was produced for dollars also had a negative impact on the economic situation. That is why the President of Venezuela, Nicolas Maduro, adopted a resolution on the issue of national cryptocurrencies El Petro. The main idea was to bind El Petro to the oil reserves of the state.
At first sight, all thought: cryptocurrency does not give the impression of a “pyramid” or “bubble”, the asset was supported by natural resources of the state. The main objective of El Petro – improve the welfare of the country and the improvement of the economic situation by bypassing sanctions in osushestvleniya commodity-market relations, and attracting investment. Attended and indirect causes of a political character: strengthening the position of power in the country and a possible agreement with the other States with the purchase of El Petro could affect the economic situation in Venezuela.
How it all began
Earlier, in late February and early March, 2018, the start-up of Petro El can be safely called successful. $735 million in its first day of sales, 83 000 buyers from 127 countries, the ambitious plans of the President of Venezuela on the promotion of El Petro and cryptocurrency on the world stage. For example, Venezuela was planning to buy spare parts KAMAZ, paying their own national cryptocurrency. But the Russian truck manufacturer is not interested in this offer of cooperation.
Also, Nicolas Maduro issued a decree about the need to commit part deals in El Petro: this applies primarily to companies, or otherwise working with the country’s natural resources. In Venezuela, began active promotion of the transition to digital currency. Citizens actively supported this trend. After all, even before the release of El Petro, the population tried to resist financial crisis and looking for alternative local Bolivar: a transfer of funds in bitcoin and altcoins, or was engaged in mining.
Problems and reasons to doubt the effectiveness of El Petro
Some analysts were convinced that El Petro will contribute to strengthening the economy of Venezuela. What was the cause for doubt? The reasons were many: it and sharp criticism not only from representatives of the public sector, but also from the crypto community, and the decree of Donald trump on the introduction of sanctions against the national cryptocurrency of Venezuela El Petro.
But there were also purely technical discrepancies in the project were present shortcomings, and it was unclear on the basis of what platform it is released tokens – Ethereum (in accordance whitepaper project) or NEM (this information was published on the website of El Petro).
There were also questions about how is linked to oil and can be each provided with El Petro barrel of oil No 1 Ayacucho. It seemed strange that the project was interesting for investors, despite the negative reputation of the President of Venezuela. In addition, cryptocurrency El Petro was created in defiance of the decision of the Parliament of Venezuela, who opposed its release.
And finally, there was no official confirmation of the fact that during the presale do was collected the amount that has designated Maduro. The impression was that all the news about the El Petro not reflect the real picture of events, and among investors there are influential political figures, which provide considerable support for the Venezuelan President.
Some traced and the possibility of cooperation of Venezuela with Russia on launch of a national cryptocurrency. Shouldn’t be ruled out that the creation of a kind of bitcoin has contributed to the weakening and even the possible replacement of the dollar. While countries suffering from the sanctions the US could unite for the realization of this idea.
The results of the implementation of national cryptocurrencies
Now, six months later, it becomes clear that the national cryptocurrency of Venezuela El Petro has not changed the economic situation in the country in a better way: the political crisis intensified, and inflation is growing rapidly. Despite a seemingly successful start, which said in February-March, and later Nicolas Maduro has failed to popularize the cryptocurrency El Petro. For example, in may Venezuela has offered India a thirty percent discount on the purchase of oil in the calculation of the El Petro.
In may 2018 the inflation rate reached 24 500% in annual terms. Prices are rising roughly 2.4% on the day, the level of crime, there is a noticeable deterioration of living standards of the population.
The issue of national cryptocurrencies El Petro was insufficient to improve the situation in the country. The starting point was the drought of 2016: the problems started with electricity due to the failure in operation of hydropower plants. This led to the stopping of the plants, consequently, fell the price of oil. The country lost its main source of income, consequently, the local currency began to plummet.
But Venezuela was in a deep crisis at once: it is the result of internal and external policy pursued by the government for several years. Most of the measures that were adopted to fight hyperinflation, proved ineffective. For example, in the winter of 2017 began production of vertical bills from 500 to 20 thousand bolivars. Previously, the largest bill was 100 bolivars. Later, to cope with speculation, the security services began to monitor prices on food markets. But this has not led to the desired effect: the stores were completely looted.
The size of the international debt Venezuela is $100-150 billion. This sample data provided to the Wall Street Journal, but the exact amount remains unknown. Only one thing is clear: the causes of the economic crisis lie much deeper than the effect of the sanctions, cryptocurrency El Petro is not able to help Venezuela to improve the situation.
Future plans of the Venezuelan President
The President of Venezuela is preparing a new reform cryptocurrency related El Petro and ostensibly aimed at overcoming inflation. Previously, it was announced the denomination of the Bolivar and its relation to El Petro. And on August 20 will be binding salaries and pensions to the national digital currency. Maduro considers that such a measure would be effective to fight against speculation.
The President is confident that by 2020 the economy will fully recover. But, nevertheless, according to data provided by IMF experts the inflation rate in Venezuela will reach 1 million percent by the end of 2018. While no national cryptocurrency El Petro or other actions of the government are unable to restrain inflationary pressures. Against the background of devaluation of local currency and unstable economic and political situation the people of Venezuela have begun to actively buy bitcoins via p2p site LocalBitcoins.
In theory, the idea of launching national cryptocurrency was supposed to help Venezuela to withdraw from FINANSOVOGO crisis, but in practice this has not happened. The conclusion from this follows: El Petro is such a “pseudocreativity”, which does not perform its functions. Nevertheless, nicolás Maduro confidently holds the course for the further introduction of cryptocurrency to the country’s economy. In this regard, the question arises: El Petro is a promising tool that just happened to be effctive in the hands of the Venezuelan government, or is the project of other States, which aimed at the weakening of the dollar and introduced to the Venezuelan economy with this purpose?