MIAMI — On February 20, Venezuela’s dictatorship led by Nicolas Maduro launched the world’s first autonomous cryptocurrency, the Petro.
Maduro believes that the Petro will turn around the collapsing economy that’s crippled Venezuelans, who are now facing the terrible effects of hyperinflation (5,000% estimated 2018).
According to Simon Constable, from Forbes, the Petro is Venezuela’s version of Bitcoin.
The new cryptocurrency will be backed by the country’s vast crude oil reserves, as well as gas and precious metals.
“National Airlines will be able to pay in Petro or any other cryptocurrency [for] fuel and services associated with the airlines in the rendering of their services in Venezuela,” said Maduro.
He also ordered the elaboration of a manual for the payment of tourist services in the country through the Petro or any other virtual currency.
As Maduro continues to advertise his new oil-backed cryptocurrency, PDVSA is to cut production once again after falling short of its 2017 goal. pic.twitter.com/fAywf1nKJ0
— Prof. Steve Hanke (@steve_hanke) March 1, 2018
State petroleum industry is called Petroleum of Venezuela (PDVSA)*
However, it is widely believed by numerous economists that the creation of the Petro involves dark intentions related to money laundering.
Carlos Vargas, the Director of Venezuela’s Cryptocurrency Superintendence (SUPCACVEN), said on Friday that, “following Maduro’s orders, all airlines in the country must consider Petro and other cryptocurrencies as payment for tickets.”
Siguiendo instrucciones del presidente Nicolás Maduro, se autoriza a las Aerolíneas el cobro de los boletos nacionales e internacionales en Petro y otras Criptomonedas#VenezuelaEsInclusión
— Carlos Vargas (@SupCarlosV) March 1, 2018
Numerous Venezuelan government officials have been linked with drug trafficking, money laundering, terrorism, and corruption. Its Vice President, Tareck El Aissami, is one of them.
U.S. DEPARTMENT OF THE TREASURY: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Venezuelan national Tareck Zaidan El Aissami Maddah (El Aissami) as a Specially Designated Narcotics Trafficker pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act) for playing a significant role in international narcotics trafficking. El Aissami is the Executive Vice President of Venezuela.
And even though Venezuela owns the largest crude oil reserves in the world, its corrupt management has led its main income into bankruptcy. PDVSA (Venezuelan state oil company) has run out of cash to pay its external debt.
According to Moody’s, Venezuela owes $141 billion to bondholders, oil companies, airlines, China, Russia and other creditors that led the government to default in November.
“Venezuela has been known for misappropriation of assets in the past and the central bank has just created hyperinflation, so I imagine there’ll be trust and transparency issues,” said Harry Colvin, Director and Senior Economist at Longview Economics, to CNBC.
And the aviation industry is not the only one that seems to be facing this situation; Maduro has ordered the acceptance of any cryptocurrency, including Petro, to several clusters in the country.
“I order the payment of consular services in all embassies and consulates of the Bolivarian Republic of Venezuela in the world, [and] all consular services in the country, in the Petro currency or in any cryptocurrency,” said Maduro.
The Venezuelan gov't is incompetent. After failing with their traditional currency, who actually thinks that the #Petro is going to work. #Maduro still hasn't revealed the blockchain or what the redeemable value of the cryptocurrency is. https://t.co/nO7jReckU1
— Prof. Steve Hanke (@steve_hanke) February 28, 2018
In August, the Trump administration ordered financial sanctions to Maduro’s regime that prevent any bondholders with business in the U.S. from buying new Venezuelan government bonds.
Moreover, the U.S. Treasury Department warned in January that investors who buy the cryptocurrency “may be exposed to U.S. sanctions risk” and the Venezuelan National Assembly declared Petro as an illegal currency ahead of its launch.
The presale of Petro already began with 60$ per token, considerating it does not give investors any ownership stake in Venezuelan oil. The government is trying to sell $2.3 billion worth.
And as far as the airline industry is concerned, receiving Petros in exchange of tickets might become another operational hazard for both domestic and international carriers in Venezuela.
Currently, there has been a massive drop of over 550% in international seat availability since 2010. Numerous international carriers have chosen to ax their routes to the Venezuelan capital city citing economical instability, safety concerns, and the growing debt of $3.8 billion that remain trapped in the country.
At the moment, only American Airlines, Air France, Air Europa, Iberia, TAP Portugal, Turkish Airlines, and Copa Airlines continue flying to Venezuela, albeit with a fraction of the loads that once put Caracas as a prime destination for all the carriers that flew the route.
All these carriers had been allowed to sell their tickets in US Dollars only. Today, however, the new government directive might put them in the awkward position of having to sell tickets in Petros.
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Also, should American Airlines accept Venezuela’s mandate to sell tickets in Petros, would that breach the US Treasury Department’s directive, which warns investors to stay away from the offering, saying it may violate international sanctions.