Li Jing
Venezuela has officially terminated its Petro cryptocurrency after a tumultuous five-year period. Launched in 2018 by President Nicolas Maduro, the Petro was intended to bolster Venezuela’s national currency, the bolรญvar, amidst a severe economic crisis. The cryptocurrency was backed by the country’s substantial oil reserves.
From the outset, the Petro faced skepticism and legal challenges. The opposition-controlled congress in Venezuela declared it illegal, criticizing the government for using the nation’s oil reserves in this manner. Additionally, in 2019, the U.S. imposed sanctions on a Russian bank involved in financing the Petro.
What is Petro (PTR)?ย
The Petro, also known as petromoneda, is a digital currency introduced by the Venezuelan government in 2017, officially launched in 2018. It was proposed as part of an effort to bolster the struggling Venezuelan economy, which was suffering from severe inflation, shortages of essential goods, and financial mismanagement. Backed by Venezuela’s vast oil reserves, the Petro was envisioned as a tool to circumvent international sanctions, particularly those imposed by the United States, and to provide an alternative financial system for the country.
Despite its ambitious goals, the Petro has been mired in controversy and skepticism since its inception. Concerns about its actual backing by oil reserves, the extent of government control, and its effectiveness in stabilizing the economy have been prominent. Additionally, the Petro was seen as a potential means for illicit financial activities, given the anonymity and lack of regulation in the cryptocurrency market. This skepticism was further fueled by the U.S. banning transactions with Venezuelan government-issued cryptocurrencies in 2018.
In practice, the Petro failed to achieve widespread adoption or make a significant impact on Venezuela’s economic recovery. Its utility remained limited, with many uncertainties surrounding its redemption and value stability. Meanwhile, Venezuelans increasingly turned to other cryptocurrencies, such as Bitcoin, for transactions and to preserve value amidst the bolivar’s devaluation. Cryptocurrency trading in Venezuela saw a significant rise, indicating a preference for more established digital currencies over the government-sponsored Petro.
The Venezuelan government attempted to integrate the Petro into various state services, including passport issuance and social housing projects, and partially pegged the minimum wage to it. However, its adoption remained limited, mainly confined to the Patria Platform, the sole website for its trading.
The Petro’s downfall was further hastened by a corruption scandal related to the mismanagement of funds from oil operations using crypto assets. This scandal led to the resignation of the petroleum minister, Tareck El Aissami, and the detention of several officials, including top management of the Sunacrip crypto regulator. It also triggered a crackdown on Bitcoin mining operations in Venezuela, a country where cryptocurrencies like Bitcoin have been popular due to hyperinflation and the declining value of the bolivar.