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Venezuela’s state-owned oil company PDVSA will start using the local cryptocurrency El Petro for all its transactions on August 20, President Nicolas Maduro said, as quoted by Sputnik. The president did not mention whether PDVSA’s business partners agreed with the change. Yet the shift to a cryptocurrency in all of PDVSA’s business dealings is only part of a much bigger monetary overhaul.
From August 20, the petro will begin to be used in parallel with the national currency the bolivar, and its prices will be pegged to that of the bolivar. Maduro said that the central bank will start issuing daily exchange rates for the two as well.
Last December, Maduro shocked analysts who follow both the country’s flirtations with default and the cryptocurrency community by announcing that Venezuela would 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.”
The cryptocurrency was launched in February this year despite opposition from parliament. The digital currency will be backed by Venezuela’s oil and gold reserves. During the presale period alone, according to Maduro, the petro, which has already been sanctioned by Washington, generated US$6 billion in proceeds.
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The Venezuelan economy, however, has continued to deteriorate with thousands of people leaving for neighboring Colombia and Ecuador every day, prompting the Ecuadorian authorities to declare a state of emergency in several provinces.
Meanwhile, Caracas has decided to knock off five zeroes from the bolivar as hyperinflation races ahead. How this will help matters remains unclear, but there is precious little else the government could do. Maduro, however, said during the presentation of the monetary reform that thanks to the addition of the petro to the national currency and the other changes this will entail, Venezuela will recover by 2020 as “a new economic model” is developed.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.