Venezuela's Cryptocurrency Is Neither Crypto, nor Currency

Venezuelan President Nicolás Maduro has announced that he is pegging his cryptocurrency to a single fixed exchange-rate, essentially devaluing the existing bolivar by 96% in the process. In the process of announcing this, he also assured that minimum wage in Venezuela would be raised by 3000%, which only sounds good until you do the math: at an equivalent rate of $1.84 per month, the devaluation and increase to minimum wage will only raise total monthly minimum earnings to $2.20; an increase of only 36 cents.

Maduro is not known for his technological or economic insights. In fact, it's hard to imagine a national leader, lacking revolution, war, or Stalinist purges in his recent history, which has done a worse job. He uses the language of "the people," but like so many who come before him in that vein, he uses these words to hide the incompetence which underlies the actions taken. No better example of this can be found than Maduro's move to implement an "oil-backed cryptocurrency solution" named Petro.

However, not a single word in that description is true. It's not a crypto, it's not a currency, it's not backed by oil, and it most certainly is no solution to the economic crisis with faces Venezuela.

The white paper for the so-called "cryptocurrency" changes by the day; one day they're using the NEM blockchain system, the next they're building an EOS token, and it's a government-developed solution the next. It cannot be mined, nor can new blocks be added to a chain through staking; the coin can only be purchased directly from the government. And with no nodes outside the government's control, it lacks any decentralization of which to speak.

It also fails to pass the smell test of currency itself; nor is it intended to be. This might seem strange to say, given the marketing which has surrounded the Petro, but there are two factors which must be considered. First, the Petro can only be purchased with US Dollars, not with Bolivars. Second, the Petro cannot be used to purchase anything in Venezuela; it can only be used to pay taxes and utility bills within the country. Amid the rapid devaluation of the Bolivar, dollars have become more and more rare a find within the country; and in this we find the problem faced by Venezuelan citizens: those who need it cannot purchase it nor use it, and those who can purchase it do not need it not seem to want it.

Lastly, it is not "backed" by oil, nor any other scarce resource. One cannot trade in their Petros for oil barrels; instead, one's Petros are valued at what the Venezuelan government asserts as the value of their oil, at the time of redeeming the coins to pay taxes. It is therefore more accurate to say that it is backed by the promise to forgive debt at the value of Venezuelan oil; hardly what an investment worth making.

Over all, it lacks any element which could be considered a solution to Venezuela's growing problems. With such a tiny net increase to the minimum wage, painted with grandiose numbers like "3000%," it's hard to not see Maduro's government as intentionally dishonest. The writing is on the wall; the question the world is left to answer is whether this move by the Venezuelan government is done out of ignorance, or something worse.