Venezuela’s economy is in trouble, thanks to the falling value of the bolivar and sanctions enforced by the US government. The country’s president wants to address the situation with a new digital currency.
President Nicolas Maduro looked to the world of digital currency to circumvent U.S.-led financial sanctions, announcing on Sunday the launch of the “petro” backed by oil reserves to shore up a collapsed economy.
Venezuela might be about to get a second currency, and it could be just as mismanaged as the first.
Maduro said in his regular Sunday televised broadcast that:
Venezuela will create a cryptocurrency, backed by oil, gas, gold and diamond reserves.
The petro,would help Venezuela advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.
Opposition leaders derided the announcement, which they said needed congressional approval, and some cast doubt on whether the digital currency would ever see the light of day in the midst of turmoil. The real currency, the bolivar, is in freefall, and the country is sorely lacking in basic needs like food and medicine.
Venezuela’s bolivar has lost nearly all of its value against the US dollar this year, while the price of bitcoin has rocketed by almost 1,000% over the same period. The unofficial rate that most ordinary Venezuelans use to exchange money has jumped to 103,000 bolivars to the dollar, from about 3,000 at the start of the year. On top of strict domestic controls on foreign-exchange transactions, sanctions imposed by the US have made it difficult for the Venezuelan state to move money in the international financial system, supposedly delaying bond payments and other transactions.
Maduro says he is trying to combat a Washington-backed conspiracy to sabotage his government and end socialism in Latin America. On Sunday he said Venezuela was facing a financial “world war.”
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