Enter the 'petro'- Venezuela to launch oil-backed cryptocurrency

Violet Powell
December 6, 2017

Venezuela President Nicolas Maduro speaks during his weekly radio and TV broadcast on December 3, 2017.

Venezuelan President Nicolas Maduro looked to the world of digital currency to circumvent USA -led financial sanctions, announcing on Sunday the launch of the "petro" backed by oil reserves to shore up a collapsed economy.

However, other than that the President offered very few details.

The currency would help Venezuela "to advance in monetary sovereignty, carry out its financial transactions to overcome the financial blockade", according to Maduro.

The announcement shows how sanctions enacted by U.S. President Donald Trump's administration this year hurt the country's ability to move money through the global banking system.

Everyday Venezuelans have to face long lines at cash machines to withdraw the country's currency, the bolivar, which is in short supply, the New York Times reported. As of Tuesday, it took 103,000 Bolivars to buy a USA dollar.

Bare shelves at a Caracas supermarket reflect the depths of the country's economic crisis
Bare shelves at a Caracas supermarket reflect the depths of the country's economic crisis

Hyperinflation has eroded the Venezuelan bolivia's value by 97% this year, making imports incredibly expensive and causing many to abandon trust in the currency.

Over the past year, the Venezuelan bolivar has plummeted 95.5 percent against the dollar on the black market. This led the monthly minimum wage in the country down to a mere $4.3.

Economists and opposition leaders say Maduro, a former bus driver and union leader, has recklessly refused to overhaul Venezuela's controls and stem the economic meltdown.

"The Maduro dictatorship continues to deprive the Venezuelan people of food and medicine, imprison the democratically-elected opposition, and violently suppress freedom of speech", Trump said in a statement.

The leader might be looking to make payments to foreign creditors and bondholders in the cryptocurrency in an attempt to streamline the significant debt burden of the country, say opposition leaders.

"I see no future in this", added fellow opposition legislator Jose Guerra.

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