The Venezuelan government has reportedly ended its official cryptocurrency. the petro.
But what was the Petro? And why did it fail to resolve the country's 359.99% inflation rate in 2023?
The Petro: a failed experiment
Venezuela may have become the first country to launch and abolish its own cryptocurrency. according to everyone accounts, the official website, which can still be accessed, no longer allows the purchase of the Petro. The site displays an "Under maintenance" message when trying to register.
The Petro was launched in 2018 as a means to evade US sanctions. It achieved full functionality in 2020, but did not enjoy widespread adoption in Venezuela or abroad. It wasn't for lack of trying either.
The Venezuelan government tried use it as a unit of account internally, order to be used for social housing initiatives and bonding 50% of the minimum wage to the Petro.
The currency was even backed by the country's central bank. lush oil reservesa favorite topic of conversation among advocates of a BRICS currencywho advocate for commodities to support fiat currencies.
So why did it fail?
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Cryptocurrencies cannot cure corruption
Just a few months before a pivotal presidential election In Venezuela, the government's decision to eliminate cryptocurrency is like acknowledging failure. But surely the Petro will not be missed in a country plagued by constant hyperinflation.
He My dear The inflation rate of 359.99% in 2023 is already a huge improvement over the shockingly high figures of previous years. But the Petro could not (and did not) solve the country's numerous structural problems, such as corruption. According to Transparency International's 2022 Corruption Perception Index, Venezuela I note a humble 14/100, with 0 being "highly corrupt." The country ranked 177th out of 180 countries.
What's next for Venezuela?
Venezuela and the United States have been in sanctions relief talks to alleviate the burden on the almost dysfunctional Venezuelan economy. An agreement could be the first step in unlocking Venezuela's oil reserves, the largest in the world.
The country may want to consider El Salvador as a role model to improve its behavior. The Central American country regularly makes headlines with positive news: be it the approval of its "Volcanic links"or is linked to Bitcoin"freedom visa".
Bitcoin adoption is definitely not a panacea. But neither is a half-hearted attempt at Central bank digital currency.
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