The Strategist

Venezuela to issue its own gold-backed crypto currency

12/05/2017 - 11:48

President of Venezuela Nicholas Maduro declared his intention to create a state crypto currency El Petro to bypass US sanctions and "strengthen monetary sovereignty." While the national currency of the country, Bolivar, is rapidly losing its value in the conditions of hyperinflation, its crypto-analogue will be secured by oil, gas, gold and diamond reserves. It is not specified how exactly this initiative is supposed to be implemented, and attractiveness of the project for investors has not yet been evaluated.

Fabio Rodrigues Pozzebom/ABr
Fabio Rodrigues Pozzebom/ABr
The Venezuelan leader announced creation of a new crypto currency in the course of a weekly speech on national television. "XXI century has come!" - announced Mr. Maduro, without mentioning, however, neither the expected date of release of the new currency, nor technical details. According to the president, this tool will provide economic and social development of the country and will allow it to "advance in matters of monetary sovereignty, make financial transactions and overcome the financial blockade." The El Petro crypto currency will be backed by oil, gas, gold and diamond reserves of Venezuela.

This initiative arose a month after the launch of the largest in the history of the country's bill of 100 thousand bolivars, which, as the head of state said, was supposed to stabilize the circulation of money in the country. From January to September 2017, inflation in Venezuela has amounted to 536%, and can reach 2300% in the next year, a forecast of the IMF says. Introduced in August by the administration of Donald Trump, sanctions prohibited US financial institutions from making deals on debt and securities of Venezuela and its oil and gas company PDVSA; high-ranking Venezuelan officials also found themselves under the regime of personal sanctions were. In November, rating agencies announced partial default of the country on debt obligations due to non-payment of the next coupon on state-guaranteed securities of PDVSA.

Note that against the backdrop of the rapid rise in the cost of the most popular crypto currency, Bitcoin, a number of states announced their intention to issue their own digital currency. The Bank of England has been working on the development of the RSCoin prototype for several years. In November, a representative of the Bank of China said the country may introduce a state digital currency, and Russia has also repeatedly voice proposals to issue a “crypto rouble”. The Dubai authorities are trailblazers here - in October this year they launched the emCash crypto currency to pay for government services.