Venezuela, a country battling one of the deepest economic recessions on record, is set to launch a new fiat currency pegged to its oil-backed “petro” cryptocurrency next month, according to President Nicolas Maduro.
Venezuela to Create Fiat Currency Pegged to Cryptocurrency That is Pegged to Oil
As reported by local news outlet Telesur, Maduro said that the new fiat currency, called the Bolivar Soberano (Sovereign Bolivar), is going to help take five zeroes away from the bolivar, its current fiat currency. Maduro was quoted as saying:
“The economic reconversion will start on August 20 definitively with the circulation and issuance of the new Sovereign Bolivar, the new monetary cone that is going to have a new method of anchoring the petro.”
Per various reports, the move is being made to prevent the country’s inflation rate from hitting 1,000,000%, a number it’s expected to reach this year. Venezuela’s economy has been steadily collapsing after the 2014 oil price crash, which left it unable to keep providing hefty subsidies. In June, its annual inflation topped 46,000%.
According to the International Monetary Fund (IMF), Venezuela’s inflation will put its economic crisis on par with that of Zimbabwe in the 2000s and of Germany in the 1920s. Maduro’s Bolivar Soberano, per his own words, is set to “stabilize and change the monetary and financial life of the country in a radical manner.”
Government’s Inflationary Policy ‘Correct Vision’ for Venezuela
The Venezuelan government claims its financial situation derived from an “economic war” that its opposition, backed by Washington, levied against it. The U.S. has imposed sections on the country, and President Donald Trump banned U.S. citizens and residents from investing in the etro.
Trump’s move, per Venezuela, was free publicity that doubled the number of interested investors. Critics have pointed out the oil-backed cryptocurrency suffers from poor credibility, as the government wasn’t able to properly manage the bolivar. Century-old think tank Bookings Institute has, as covered, claimed it actually undermines legitimate cryptocurrencies.
Venezuela had in April said that the petro’s impact would be felt within three to six months and now claims “it will end up being consolidated technologically and financially.” Maduro added that the government has the “correct vision of what the economic future in Venezuela should be.”
Meanwhile, minimum wage in the country has dropped to little over $1 a month, leaving citizens struggling to obtain food and basic health care. The situation has become so dire that, as CCN reported, a Venezuelan Redditor bought 400 kilograms of food with 90.1 NANO, then worth about $208.
The South American country has also revealed it plans on financing villas for the homeless using the petro, after a plan to sell oil to India at a discount using the cryptocurrency failed because India refused to pay using the cryptocurrency token.