Slum in Venezuela’s capital Caracas. Picture of Dr. Alexey Yakovlev via License: Creative Commons

After almost six years, Venezuela is giving up. The Petro Coin, which was supposed to free the country from sanctions and hyperinflation, is history. In a way, the Maduro government is coming to terms with reality.

Venezuela’s socialist government under Nicolas Maduro launched the Petro in 2018, while the ICO hype was still raging: a token that was backed by the country’s rich, untapped oil reserves and was intended as a stable unit of account to support the notoriously inflating bolivar.

The Petro should also help to circumvent the sanctions that have long plagued the country. This was shown not least by the fact that the Russian bank Evrofinance Mosnarbank was involved in the founding of Petro, which, along with illegal oil transactions, was one of the reasons why it was also sanctioned a year later.

The fact that the government is now canceling Petro should not be seen as capitulation to sanctions. Rather, Venezuela is more likely to recognize that having its own token with its own infrastructure is the worst option if you want to circumvent sanctions through cryptocurrencies.

Despite all the efforts of the government, the story of Petro was a story of failure. From the beginning, the population did not trust the token, least of all the crypto community, which is very active in Venezuela. She suspected that it was nothing more than a shitcoin in the name of the state.

The government tried to force Petro on the market. It required that passports be paid for in Petro, the minimum wage was tied to 50 percent of the Petro, and in 2020 Maduro even tried to force airlines to use the Petro by ordering that refueling in Venezuela’s capital Caracas be paid for with the token. Banks were also forced to report their balances in both petro and bolivars.

But none of this could promote acceptance of the Petro. Neither the people nor the crypto scene nor abroad trusted the token. Technically, the coin never worked as it should. For example, traffic fines were denominated in Petro, but it was impossible to pay them with the token. Until recently, it could only be traded on the government’s own Patria platform.

The death blow to Petro was a corruption scandal that shook the country last year. It involved irregularities in the management of revenue from oil production in cryptocurrencies. This led to a crackdown on some Bitcoin miners, the arrest of some officials, and the resignation of Oil Minister Tareck El Aissami.

El Aissami is not just anyone, but one of the most powerful figures in the country. He was deputy prime minister, head of the secret service, minister of industry and finally minister of oil. The USA had already put him on a sanctions list in 2017 because it accused him of being involved in the drug trade of Colombian cartels and of having carried out money laundering. Apparently he was also involved in the founding of Petro and, possibly with it, evaded sanctions. At least long-term contacts with Russian dictator Vladimir Putin are known.

The Petro token should now be processed properly. All wallets on the Patria platform were shut down on Monday, January 15th; the remaining balances are exchanged for bolivars.

However, the end of Petro is likely to play a minimal role in circumventing sanctions. In addition to traditional bank transfers, Venezuelan-Russian oil trade has also been carried out through the stablecoin Tether in recent years. Unlike Petro, Tether is still very much alive, and unlike the Maduro government, its publisher, the Tether company, enjoys the trust of the markets.

And with that – with Tether and also Bitcoin – Venezuela has now arrived at the solution, both for sanctions and inflation, which has been obvious for a long time.


Leave a Reply