You know you're in trouble when your only hope for stability is notoriously unstable as a cryptocurrency. And yes, Venezuela seems to be very in trouble.
According to Bloomberg, Venezuelan President Nicolas Maduro announced on Friday that he intended to link a new national currency, the sovereign bolivar, to a cryptocurrency of his government, the Petro. This is the first case of a government that links its economic fortunes so closely to that of any digital currency and suggests a possible way out for a country devastated by hyperinflation.
That is, would suggest an exit path … if the plan had any hope of transforming the disordered economic situation of the country around. Instead, the act depreciates the bolivar by about 96 percent when it takes its new form leaving many questions about Petro unanswered.
The changes presumably took effect today.
The hyperinflation expert and economics professor Johns Hopkins Steve Hanke warned CNBC that the Petro token based on the NEM blockchain would probably not be a real cure-all for the ills of Venezuela.
"This is a typical smoky operation of Venezuela – I will believe it when I see it," he told the publication. "The problem with Petro is that it is a scam, it does not even exchange."
Petro, meanwhile, is presumably supported by oil, although this has also been questioned.
"They are preparing a position on the Venezuelan portico to sell snake oil that is basically backed by nothing," managing partner Russ Dallen told McClatchy in March. "People think it's supported by oil, but if you read the contract, it's not really."
And even if you could try to mortgage your future for the opportunity to score some Petro coins, those in the United States will have to wait. In March, President Donald Trump banned the purchase of the digital currency. It seems unlikely that the ban will be reviewed anytime soon.
So, in summary, 96 percent depreciated the Venezuelan bolivar – renamed the sovereign bolivar – is now connected to Petro's cryptocurrency. Petro, meanwhile, is a token that is supposedly backed by Venezuelan oil, but has been called a scam.
Yes, it seems that the people of Venezuela are still in trouble.