Published On: Thu, Jan 11th, 2018

Venezuelan parliament rejects oil-backed cryptocurrency as problematic and dangerous

Venezuela's President Nicolas Maduro speaks during a news conference at Miraflores Palace in CaracasCARACAS - The proposed oil-backed cryptocurrency, the “Petro”, set to launch in early 2018, has been challenged by the Venezuelan parliament on the grounds that it would be “illegal” to mortgage the countries oil reserves.

The opposition-led parliament has signaled a strong resistance and skepticism for the proposal, which does not necessarily mean that, under President Nicolas Maduro, the roll out of this $6 billion Petro currency plan will not be implemented.

Amidst a furious internal civil war between Maduro’s regime and opposition forces, Venezuela has undergone tremendous political, social and economic instability over the last 12 months.

Now Maduro is intent on putting the Venezuelan oil resources to their maximum use by leveraging them on every world financial market that he can, which also means taking advantage of the blockchain/cryptocurrency phenomenon sweeping financial markets.

The use of cryptocurrency and the blockchain technology that backs it would allow flexibility for Maduro to use oil resources as a medium of exchange and would allow the already internationally-sanctioned Venezuelan government under Maduro’s leadership to circumvent those very same economic sanctions, providing him with the capacity to raise revenue from external and possibly anonymous sources.

The danger of this is that it may place Venezuelan oil resources into the hands of anonymous owners, or investors who wish to remain anonymous, but it also means that money will go back into the coffers of the Maduro regime unchecked, unregulated by national standards and untraceable by the international community and various international money laundering watchdogs.

Whether or not Maduro will move ahead with this remains to be seen. However, the national debate in Venezuela on these recent developments are far from over and may very well lead to another spate of civil unrest and political turmoil.

Cryptocurrency traders have also expressed concern over working with Maduro on this Venezuelan Petro currency, citing issues such as trust, risky investments with an unstable regime and the likelihood that oil prices drop and the Petro currency drops in value.

Also, as equally as important according to some experts, working under the framework of an asset backed cryptocurrency is meaningless in terms of cost-benefit, because blockchain technology for the transfer and valuation of cryptocurrencies does not need “brick and mortar” asset classes to underwrite their value in the first place.

By Youri Kemp

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