It’s not the first time that Venezuelan President Nicolas Maduro has restructured the Venezuelan economy but it might be the most significant update so far.
With the economic crisis in Venezuela reaching levels that some are calling a humanitarian disaster, and inflation projected to reach 1,000,000% by the end of the year, President Nicolas Maduro is now turning to crypto to try and stabilize the situation.
This announcement might not be getting enough attention in the mainstream media but it certainly is turning a few heads in the crypto space.
Because the Venezuelan national cryptocurrency, known as the Petro, is pegged to the price of oil, the government’s hope is that it will provide a backstop to the new version of their currency, the Sovereign Bolivar.
The old Bolivar was a bit complex because it carried an official exchange rate of 10 Bolivar’s to the Dollar, whereas the actual rate on the street was more like six to eight million Bolivars to the Dollar.
Several reports have indicated that the new structure represents a massive devaluation of the Bolivar. However, those headlines might be misleading.
As each Petro is supposed to be pegged to a barrel of oil, one Petro should be worth about $60, so the new minimum wage of half a Petro a month is about 3000 times the current minimum wage, which is about $1 per month.
The main problem with this plan is that we still have no way of verifying that each Petro represents one barrel of oil. Should the Venezuelan Government wish to provide this level of transparency, it would be rather simple using the Ethereum blockchain. But alas, Maduro chose to use the less transparent NEM network for the Petro and therefore we have no choice but to hang on his two words that were prevalent in his Friday night announcement…
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