Can Bitcoin Help The Venezuela Crisis As Country Pawns Off Gold, Petro Dollar Slides Further Down
Could Bitcoin Help Venezuela Crisis?
According to the International Organization for Migration, a long period of serious political instability and economic crisis has caused the largest Latin American emigration seen in recent times from Venezuela. The country’s inflation rate hit 1.62 million percent in March but according to the International Monetary Fund (IMF), it is expected to hit 10 million percent sometime this year. The country is in so much disarray that child malnutrition officially reached United Nations (U.N.) crisis levels and the spread of diseases (even some which were eradicated) has increased, causing an estimated 3.4 million Venezuelans to leave the country (some through rather dangerous means) in search of a better life. Regardless, in an effort to retain power and as much autonomy as possible, President Nicolas Maduro has been selling a lot of the country’s gold stash.
Depleting Gold Reserves
Recently on May 10, the Central Bank of Venezuela sold about 9.7 tons of gold. Three days later on the 13th, the apex bank sold another 4 tons, depleting the country’s gold reserves by at least $570 million. This was done in a bid to sidestep sanctions initiated by the United States Treasury’s Office of Foreign Assets Control in April, to freeze the government’s assets. The country’s gold assets are now down to $7.9 billion, it’s lowest in about 29 years.
Since April, the total amount of gold sold has now hit 23 tons and at the moment, Turkey and the United Arab Emirates are said to be the main buyers of the Venezuela reserves.
The Venezuelan Digital Currency – The Petro Dollar
Announced in December 2017, the petro is a Venezuelan digital currency supposedly backed by oil and mineral reserves. At the time, the financial and economic uncertainty and instability was doing a lot of damage to the Venezuelan Bolivar – its official currency – and so the Petro Dollar was issued in February 2018 to support the Bolivar and also help stabilize the country’s internal economy. However, the digital currency has failed.
The Petro’s failure could be due to the fact that it is not exactly decentralized. Unlike other cryptocurrencies, the documents form the Initial Coin Offering (ICO) which launched the Petro specifically has it that it cannot be freely mined or traded and will not be on just any of the many cryptocurrency exchanges. According to the documents, mining will be controlled by the government and it will also choose by itself, what exchanges will be allowed to trade the Petro. This goes against the very fundamental nature of cryptocurrencies.
Furthermore, the state of the country’s economy coupled with the U.S sanctions makes Venezuela a very undependable business partner for pretty much any other institutional or government entity.
Can Bitcoin (BTC) Help?
The fact that the country’s Petro failed makes it’s obvious that the characteristics of the digital currency are unattractive. The idea of a digital currency for the country is an interesting one if it was done a bit differently. Also, even at that, it would seem like no one wants to do any business with Venezuela as it’s been almost completely excluded from the financial activities going on in other parts of the world. Even the Bank of England has prevented the Maduro administration from selling off the $1.2 billion worth of Venezuelan gold currently stored with it.
If Venezuela can be denied access to its own gold and the Petro hasn’t worked, maybe the time has come for the Maduro administration to try a more stable and properly decentralized cryptocurrency like Bitcoin. The largest cryptocurrency by market cap, Bitcoin is an unrestrained and uncontrollable medium of exchange and this might just be what Venezuela needs to circumvent the U.S. and all other countries which have blacklisted it.