Why El Petro cryptocurrency looks like a scam?
Venezuela is one of the first countries that created the national cryptocurrency El Petro at the state level and made it a means of payment. However, this new monetary policy aggravates the political and financial crisis instead of bringing economic recovery.
According to the International Monetary Fund, the inflation rate in Venezuela today is at 1,370,000% level. This led to the fact that the prices of goods are measured in millions, and to buy some toilet paper, residents of the country have to pay kilograms of money.
The main cause of hyperinflation is Venezuela’s dependence on oil. When the price of black gold collapsed, the state's economy went down. The government tried to correct the situation by controlling food prices, the nationalisation of factories and the constant printing of money that was not backed up by anything. All this led to the fact that foreign companies have withdrawn their capital from the country and shut down their productions.
Living in conditions where prices are increasing every second, Venezuelans are choosing Bitcoin as the only way to save their finances. The
cryptocurrency was more reliable than the local Bolivar, and the demand for it was so great that the exchange rate difference between crypto exchanges in the United States and Venezuela sometimes was reaching $ 2,000.
Having realized the popularity of cryptocurrencies, the Venezuelan government decided to use this tool and later introduced El Petro, the national cryptocurrency, that is tied to the new denominated national currency - the sovereign bolivar, allegedly securing the new coin with oil.
According to various sources, during
ICO El Petro managed to raise between $3 to $5 billion. However, there is no valid information on where that money has gone. Moreover, according to the Reuters investigation, the Ayacucho oil field, which allegedly was securing the value of the asset, is not being developing and no works on oil production is being conducted there.
At the same time, President Nicolas Maduro intends to sell his oil exclusively for El Petro and the coin itself is available only at six Venezuelan crypto exchanges - the only places in the world supporting the coin, while the United States has banned any operations with El Petro.
The next Maduro’s step was artificial increase of the value of the national cryptocurrency. The exchange rate of El Petro rose 2.5 times - from 3,600 to 9,000 Bolivars.
But as the result, according to Venezuelan economist Leonardo Bunyák, Maduro simply devalued the bolivar against El Petro by more than 100%.
According to him, this binding of the national currency to the tokens is binding to an empty place. In addition, El Petro is not a cryptocurrency, since its value is not determined by supply and demand, but by a presidential decree, the economist believes.
Attempts to force to use
New national cryptocurrency is being rapidly integrated into the life of Venezuelans, at least on paper. After all, the authorities ordered the public sector to pay salaries in the national stock.
Also in Venezuela, all pension payments were transferred to El Petro. If earlier pensioners received Fiat, now Fiat is being made redundant and tokens are added instead of bills.
Moreover, there were precedents when the court of Venezuela ruled to pay moral compensations in crypto-barrels.
The next stage of development was the “Constitutional Decree on the Integrated System of Cryptoactive Assets”. According to it, with each cryptocurrency transaction, the sender of the payment is obliged to pay 15% of the commission in favor of the state. At the same time, the government set a limit on the amount of monthly transfers in the equivalent of $ 600.
Cryptocurrency without a crypto wallet
All attempts to introduce cryptocurrency into the national economy of Venezuela look ridiculous, at least for the reason that so far El Petro does not have a wallet. Therefore, no store accepts these coins for payment, as well as all global crypto exchanges.
However, El Petro is a
token based on the NEM blockchain. In its network, assets are stored in a separate mosaic and, technically, it may not be necessary to make transactions for crypto wallets, according to business developer Paytomat Andrew Velikiy.
“As a NEM token, El Petro can be stored in any wallet that supports mosaic,” he explained.
However, in the blockchain El Petro throughout the entire history of the token, there were only only 7 transactions recorded, all of them were carried out within one day. And the tokens from the pre-sale ICO remained untouched. That means, that after the crowd sale, the coins did not move to any crypto wallet.
In general, according to the economist and ambassador of Crypto-Georgia Yevgeny Romanenko, such policies cannot be effective for the country and its citizens, since the Venezuelan economy has been destroyed long ago by the worst socialist practices of Chávez and Maduro.
“Attempts to revive a bolivar with a red liquid of an suspicious composition, poured from what used to be an oil barrel, on which the word Oil had been crossed out and El Petro has been clumsily written, are useless. I would not take any serious consideration about the quasi-monetary practices of Maduro, ” the economist said.
As for monetary policy, attempts to tie the new currency to oil can hardly be of any success, since the economy of the country still depends on raw materials and make the same mistakes over and over again.
“Maduro is engaged in a monetary shamanism, the recipes of which, apparently, have been casted by the Chávez’s spirit in the form of a bird. You can set a fixed exchange rate of El Petro to anything, but it is unlikely going to broaden it’s usage, ” says Yevgeny Romanenko.
Meanwhile, the project El Petro has all the signs of scam - the oil field, that meant to secure the national cryptocurrency of Venezuela, is not being developed, and it is impossible to buy this coin on the crypto exchange. And since there are no wallets for El Petro, it’s hard to imagine how transactions go through this network. At the same time, people’s demand for Bitcoin remains the same, and last week Venezuela set a record in terms of
trading volume with the first cryptocurrency - 1972 BTC.
Nicolas Maduro under the guise of innovation has introduced a deliberately unsuccessful project. In addition, in the very socialistic style, the authorities decided to replenish the budget with all sorts of taxes from cryptoindustry: from
mining to cryptocurrency operations. It is unknown for how long this story will continue, however until the end of 2019, the International Monetary Fund expects the sovereign Bolivar to devalue to the mark of 10,000,000%.
Posted by: Annabella Lapshyna