Venezuela Halts Operations of the Digital Currency Petro

Venezuela halts operations of the digital currency Petro

According to Max Keiser, a veteran Bitcoin investor, the national digital currency of Venezuela, Petro (PTR), will officially cease operations starting January 15, 2024, after almost 6 years since its launch. All PTR will be converted to bolívar, Venezuela’s national currency.

Petro was introduced by Venezuelan President Nicolas Maduro in 2018 to support the national currency bolívar amid rampant hyperinflation, reaching thousands of percentage points, due to economic sanctions imposed by the United States, which effectively isolated the country from the global investment market.

As predicted in 2019, Venezuela’s ‘Petro’ coin was never gonna work for the exact reasons I said it would fail. https://t.co/dKNSeiw2Fs pic.twitter.com/UyxcNQjxGP

— Max Keiser (@maxkeiser) January 14, 2024

The national digital currency Petro is pegged to the abundant oil reserves of Venezuela. The price of 1 PTR is supposed to be equivalent to the price of 1 barrel of Venezuelan oil – approximately 60 USD per barrel. It was envisioned as a multifaceted national asset, including:

• A transferable asset for trading goods and services, even as cash.

• A digital platform for transferring and trading electronic assets backed by various resources such as oil in Venezuela.

• A legal means of payment throughout the territory of Venezuela: Allowing citizens to use PTR for taxes, debts, fees, and being accepted by individuals as well as businesses.

However, it has not been widely adopted by citizens and lawmakers due to being labeled as illegal for misusing the country’s oil reserves, along with disapproval from national banks like Banco de Venezuela. In 2021, the Central Bank of Venezuela also announced plans to issue a CBDC, but as of now, this plan has not materialized.

Related: The Transformative Influence of CBDCs on Central Banks’ Risk Landscapes

Despite criticism from both within and outside Venezuela, the Maduro government continues to promote Petro to the 10 member countries of the Bolivar Alliance, even declaring intentions to replace the US Dollar (USD) in crude oil trading and airline ticket purchases.

In reality, after almost 6 years of existence, Venezuelans do not fully understand how Petro operates, and limitations in its use for certain state activities, such as tax payments or traffic fines, contribute to the dwindling relevance of this national digital currency.