The Venezuelan Parliament, run by the opposition, voted on Tuesday to declare Nicolas Maduro’s plan to issue an oil-backed cryptocurrency—the Petro—illegal, claiming that it violates the constitution and attempts to mortgage part of the country’s oil reserves.
Since losing majority in the National Assembly in 2016, Maduro has been ignoring the legislature, and the pro-government Supreme Court has overturned almost every measure that the opposition-dominated parliament has passed since then.
In a July 2017 election boycotted by the opposition, Venezuela elected the Constituent Assembly, which triggered the stricter sanctions that the U.S. slapped on the country in August, including prohibiting U.S. persons or companies from participating in the new debt issued by Venezuela or its state oil firm PDVSA.
In early December, Maduro shocked both analysts who follow the country’s flirting with default and the cryptocurrency community by announcing that Venezuela was planning to launch the petro cryptocurrency, backed by oil, diamonds, and gold reserves, to help the country to “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”
At the end of December, Venezuela’s Communications Minister Jorge Rodríguez said that the country was getting ready to launch within days its own digital currency—El Petro—which will be backed by more than 5.3 billion barrels of oil and support US$267 billion worth of financial instruments.
While Maduro is recruiting miners for the digital currency, the opposition-led Parliament denounced the cryptocurrency move, called it illegal, and warned potential investors and cryptocurrency market players that the Petro emission is illegal, as is any other obligation by the state of Venezuela backed by oil or other mineral reserves. Related: Grading 2017 Oil Price Predictions
According to Parliament, the petro issuance is an attempt by the government to avoid control over public debt operations as set in article 312 of Venezuela’s constitution.
“This is not a cryptocurrency, this is a forward sale of Venezuelan oil,” legislator Jorge Millan said, as quoted by Reuters. “It is tailor-made for corruption,” Millan added.
According to digital currency experts, Venezuela’s inability to manage its economy and the Socialist party’s historic lack of respect for private property will deter investors from snapping up petros.
By Tsvetana Paraskova for Oilprice.com
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