US president Donald Trump issued an executive order today banning US citizens and residents from buying, trading, or dealing in Venezuela’s national cryptocurrency, the Petro.
The executive order is a big deal for a number of different reasons. One reason is that it’s believed to be the first cryptocurrency-related executive action taken by a US president.
The Whitehouse announced the news on March 19, 2018.
Why did Trump ban US citizens from using a random cryptocurrency few people have heard about?
Well, the executive order was issued “in light of recent actions taken by the Maduro regime to attempt to circumvent U.S. sanctions by issuing a digital currency in a process that Venezuela’s democratically elected National Assembly has denounced as unlawful.”
The executive order covers all cryptocurrencies offered by the government of Venezuela. It’s a blanket ban. Here’s how the executive order explains it:
“All transactions related to, provision of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018, are prohibited as of the effective date of this order.”
It doesn’t just block American citizens: it blocks any dealings within the United States as well. It’s illegal to transact using Venezuela’s national cryptocurrency within the United States.
The order is a blanket ban against all cryptocurrencies offered by the government of Venezuela. However, the order also specifically mentions the Venezuelan government’s new “Petros”:
“…including the Central Bank of Venezuela and Petroleos de Venezuela, S.A. (PdVSA), and any person owned or controlled by, or acting for or on behalf of, the Government of Venezuela.”
The order took effect at 1215pm EST on March 19, 2018.
Venezuela Released the Petro in February to Avoid International Sanctions
Venezuela held a token sale for its “Petro” token back in February. The country claims it raised $735 million in its first day. The Petro token, or PTR, is an oil-backed cryptocurrency.
A national cryptocurrency backed by the value of oil might sound good – but there’s one big problem: the cryptocurrency is mostly designed as a way for Venezuela to avoid sanctions assessed by the United States.
The Petro (PTR) is pegged to Venezuela’s oil reserves, and the government offers a discount when exchanging Petro tokens into Venezuelan Bolivars.
Venezuela has ordered its state-owned companies and national airlines to begin accepting the Petro.
The launch of the Petro has been widely criticized by economists. Some believe that the Venezuelan government is simply trying to capitalize on the hype surrounding cryptocurrencies. Others see it as an obvious move to avoid US sanctions. And some see it as a way to create foreign currency reserves from thin air – something that is unlikely to help the flagging Venezuelan economy.
Another controversial thing about the Petro token sale is that the money was raised from foreign investors. Venezuelans aren’t able to purchase the oil-backed cryptocurrency. Investors who did purchase Petro tokens violated international sanctions.
CCN has a good writeup on the problems related to the Petro, including quotes from the Brookings Institute. The Brookings Institute argued that Venezuela’s Petro would not only harm the Venezuelan economy – it could also permanently degrade the reputation of cryptocurrencies around the world:
“A hard line must be drawn on the development of empty cryptocurrencies that are ultimately a form of national illicit debt relief, or else serious and legitimate adoption of cryptocurrencies will be seriously stifled.”
In any case, Trump has banned Americans – and anyone in America – from participating in any activities related to Venezuela’s national cryptocurrency. It remains to be seen what kind of effect this will have on the future of the Petro (PTR). However, it’s the first executive order issued by a US president specifically targeted at cryptocurrencies.