In a surprising twist on December 3. 2017, cryptocurrency mining in Venezuela was deemed legal by President Nicolas Maduro. who expressed interest in cryptocurrencies and announced that the Venezuelan government intended to create an official cryptocurrency for the country, to be called the “petro.” Less than two weeks later, however, authorities ransacked a mining operation in western Venezuela, seizing the equipment and arresting its operator.
This GBC was made available amidst controversial allegations and warnings: an open letter to the U. S. Secretary of the Treasury Steve Mnuchin from U. S. Senators Marco Rubio and Robert Menendez denounced the petro as a way for the country to circumvent U. S. sanctions. Since its introduction, reports have emerged indicating that Russia helped Venezuela create the petro as a way to do just thaL At press time, news was circulating that President Donald Trumps administration had plans to restrict the use of the cryptocurrency for U. S. financial transactions.
The petro is supposedly tied to Venezuelan oil. gold, gas and diamonds. It has been lauded as a way to save the country from its economic crisis. It has alternatively been labeled a public relations trick to distract the public from the real economic issues that the country is facing, as well as a way to take foreign investment and. perhaps speculatively, as a test for the use of
GBCs for larger nations not yet ready to deploy the technology themselves.
But first and foremost for many cryptocurrency advocates, a government-backed version like the petro will not include the things that make something like Bitcoin truly valuable.
For Jeffrey A Tucker, the editorial director of the American Institute for Economic Research (AIER). there is no real point in a GBC like the petro. In a blog post for AIERs website. Tucker addressed the viability of GBCs by examining the potential for Russias cryptoruble, the countrys own potential cryptocurrency. In the post, he asserted that one of the most important attributes of cryptocurrency is that it reduces centralized control. Today, the dollar acts as the worlds reserve currency, but because of national separation, there are many places in the world where it is not and will never be spendable. In contrast. Bitcoins decentralized nature, specifically its ability to be transacted across borders, grants it a much greater potential market capitalization.
“The effort in Venezuela is no different from that of Russia.” said Tucker. “I dont think it will become viable.”
Tucker argued that the idea of backing a cryptocurrency with something physical, such as oil. creates unnecessary complications that offer no improvement for a market and would therefore most likely fall apart under real market pressures. He pointed out that the tight control with which most governments want to oversee their currency is precisely why cryptocurrencies have arisen as popular alternatives to fiat.
“If I were advising governments. I would tell them not to waste their time with this measure.” Tucker said. “Instead, be the first country to fully embrace Bitcoin.”