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Venezuela's Maduro, under pressure from United States sanctions, vows to launch cryptocurrency

05 December 2017
Venezuela's Maduro, under pressure from United States sanctions, vows to launch cryptocurrency

The President has announced the launch of the country's new digital currency called "Petro" which will be backed by oil reserves and other commodity reserves like gas, gold, and diamond.

The country is now lacking basic needs like food and medicine, and its currency, the bolivar, is in freefall as it went down 57 percent last month alone on black markets due to currency controls and excessive money printing.

Still, the announcement highlights how sanctions enacted this year by U.S. President Donald Trump's administration are hurting Venezuela's ability to move money through worldwide banks.

Venezuela is to launch its own cryptocurrency to counter what it describes as Washington's "economic sabotage" in the shape of financial sanctions, the country's President Nicolas Maduro confirmed via a national broadcast. Maduro added that the petro would support the nation to advance in areas of financial sovereignty, to move past financial obstructions and to make successful financial transactions.

Opposition leaders criticised the announcement, which needs congressional approval in order to become government policy. Compliance departments in the US have been scrutinizing transactions related to Venezuela.

Maduro's pivot away from the US dollar comes after the recent spectacular rise of bitcoin BTC=BTSP, which has been fuelled by signs that the digital currency is slowly gaining traction in the mainstream investment world. The irony is that currency restriction in Venezuela in the last few years have triggered a bitcoin craze among the tech-savvy citizens who are looking to evict controls and obtain dollars for making online purchases. In just one month, there has been a 57% depreciation in the bolivar vis-à-vis the dollar owing to uncontrolled money printing and currency restrictions. As a result, the monthly minimum wage of the country stands to a critical low of $4.3.

There is very little chance that Maduro's announcement will bring any sort of relief in the short run as several million Venezuelans are now struggling with poverty and can not even afford to eat three meals in a day.

Some of the opposition leaders ridiculed the announcement.

However, opposition members of parliament have poured scorn on the plan.

"It's Maduro being a clown. This has no credibility", said opposition lawmaker and economist Angel Alvarado. On Sunday he said Venezuela was facing a financial "world war".