Venezuela’s democratically elected National Assembly has outlawed the use of a national cryptocurrency known as the “petro” on Tuesday, describing it as an illegal attempt to mortgage the country’s oil reserves.
The country’s socialist president Nicolás Maduro announced the introduction of a national cryptocurrency last month as a solution to the government’s enormous debt burden, declaring that the “21st century has arrived” in Venezuela.
Maduro argued that the move would help Venezuela “advance in issues of monetary sovereignty,” principally through the bypassing of sanctions imposed by the United States.
On Friday, the government revealed that it would release 100 million “petros” in the coming weeks in an effort to raise hard currency, although opposition lawmakers are warning investors that the currency could be rendered worthless if Maduro was ousted from power.
However, opposition lawmakers ruled that the currency was illegal due to a constitutional requirement that the national assembly approves any form of government borrow.
“This is not a cryptocurrency, this is a forward sale of Venezuelan oil,” opposition lawmaker Jorge Millan told Reuters. “It is tailor-made for corruption.”
Yet the ruling is likely to have little effect given that most its power was usurped by the regime last year through the creation of a separate illegal lawmaking body known as the “national constituent assembly,” filled solely by pro-government supporters.
The currency will be backed by the country’s oil reserves, which represent around 95 percent of its total exports, as well as other resources such as gas, gold, and diamonds.
The regime hopes the plan will enable it to get hold of hard currency to deal with the country’s worsening economic and humanitarian crisis, that has left the government almost facing a debt burden of around $200 billion while millions of Venezuelans are starving or suffering from serious unattended health problems.
It is also designed hopes to bypass sanctions imposed by the Trump administration that prohibit Americans from dealing in Venezuelan debt, making the government’s access to hard currency even more difficult. It could also help ease the pressure of hyperinflation, which has rendered the country’s bolivar currency practically worthless and forced the government to continuously release higher denomination banknotes in order to keep up with price rises.
Excitement around cryptocurrencies has soared in recent months with the stratospheric rise of the Bitcoin currency, which recently surpassed a value of over $20,000 before dropping back.