Despite Venezuelan President Nicolas Maduro’s recent claims about the successful launch of his oil-based petro digital currency, most outside observers have expressed opinions ranging from skepticism to outright disapproval of the venture. In a recent piece on its website, the Brookings Institute joined that chorus of criticism, and suggested that Maduro’s attempt to exploit the new technology could do harm to legitimate cryptocurrencies.
The Brookings article suggests that the petro’s funding has come entirely from foreign investors, due to the existence of sanctions and the fact that the Venezuelan government opted to only accept Bitcoin, Ethereum, dollars, and euros for the tokens. That country’s citizens cannot use their bolivars to purchase the new “digital currency.”
The analysis also agrees with other observers who have asserted that the petro is nothing more than a scheme designed to defeat sanctions:
“It is unclear what (if any) use the petro has for foreign speculators. The petro whitepaper limits its use to Venezuelan citizens for the payments of taxes, fees, and public services. Though the petro’s price is pegged to the price of oil, one cannot exchange a petro for a barrel of oil. By taking advantage of the speculator hype that accompanies “blockchain” as a buzzword, the Venezuelan government has managed to circumvent sanctions by accumulating foreign currency without fixing its country’s underlying economic volatility.”
Brookings concludes that the damage could be even worse than that, however, since success for the petro – however limited – might encourage other sanctioned nations to pursue similar schemes. Moreover, that type of abuse of the cryptocurrency concept could do serious harm to legitimate digital currencies:
“Although Venezuela was able to raise money in its pre-sale, speculators will quickly find the petro has no long-term value. Such realization and its aftermath may unfortunately contribute to the idea that cryptocurrencies facilitate fraud. Just as concerning, the power of sanctions is in danger of eroding – other countries may feel emboldened to act more aggressively if economic sanctions can be thwarted through cryptocurrency sales. 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.”