President Donald Trump’s administration issued an executive order that essentially bans “any transactions within the United States involving any digital currency issued by, for, or on behalf of the Government of Venezuela,” effectively making it illegal to purchase or use the oil-backed Petro cryptocurrency or any others launched by the Venezuelan government after January 9, 2018, CNBC reported.
Trump’s order is likely to further screw up the Venezuelan government’s half-baked plan to help stabilise its crashing economy by cashing in on the cryptocurrency boom with an official state version. As oil prices have collapsed and sent the country’s economy into three continuous years of double-digit contraction, Venezuelan President Nicolás Maduro has responded by centralizing power in an increasingly violent struggle with right-wing parties. The US, never a friend to Maduro or his predecessor Hugo Chávez, has responded with an increasingly severe series of sanctions.
Around the turn of the year, Venezuela announced a plan to ease at least some of these problems by creating a sort of dubious pre-mined cryptocurrency supposedly backed by around five billion barrels of oil reserves – a hastily generated plan that at best won’t help it evade sanctions and at worst might just be a thinly-veiled scam. Per Bloomberg, Venezuela only accepted offerings for Petro tokens in dollars and euros. That shut out everyone but foreign investors, of whom a significant percentage won’t be able to (legally) use their new Petro for anything under Trump’s order.
“It’s a pretty big blow,” Caracas Capital managing director Russ Dallen told Bloomberg. “Since most cryptocurrencies are not actually backed by anything real, cryptocurrency speculation is based on the greater fool theory – I can buy this at $US100 because there is someone who is a bigger idiot who is going to buy it at $US200. When you take the US out of that equation, you reduce the interest and potential for that speculation.”
While both Americans and Venezuelans alike may be becoming accustomed to sudden and arbitrary executive branch actions, Trump’s move has been signalled for some time. The Treasury Department warned investors in January that purchasing Petro could be interpreted as “an extension of credit to the Venezuelan government” and thus a de facto violation of sanctions. Trump is notoriously hostile towards nations to the south of the US-Mexico border (wonder why) and has even hinted at military intervention in Venezuela, an almost assuredly disastrous if unlikely possibility that could quickly make the value of the Petro the least of either government’s problems.