This could mean an economic collapse for Venezuela, where cash is a scarce commodity and most banking operations depend on a credit or debit card.
In this context, many are now resorting to the “petro”, Venezuela’s cryptocurrency. The Government of Nicolás Maduro announced its creation on 3 December 2018. The virtual money is not regulated by the Central Bank of any country and the transactions are immediate and transparent, without any commissions or intermediaries.

“It is the most powerful state network in the world,” Ricardo Torres, an economist and Venezuelan specialist in cryptocurrencies, explained to Sputnik.
With this initiative, one that has brought hope to many Venezuelans plagued by sanctions, the crisis, the illegal parallel currency market and the highest hyperinflation in the world, the government is trying to circumvent the US blockade.

© AFP 2018 / DON EMMERT

Venezuela Hopes Petro Cryptocurrency to Negate US Economic Blockade

However, according to Torres, the strategy has been “wrong” due to the very nature of cryptocurrency.

“The virtual money, the bitcoins and blockchains, are a republic; and trying to fight something that belongs to everyone by creating a system that is just the opposite because it is owned by the government is an error,” the expert pointed out.

“The petro, as it was conceived, is a mutation of a cryptocurrency and a debt bond. So, it is neither one nor the other. It is as if you were trying to create an amphibious car but with airplane turbines, it would be useless either in the water, or on the ground; it wouldn’t be able to fly as well,” he said.
A year after its launch, the petro is “unworkable”. You cannot buy or sell petros in virtual exchange houses. “It exists but it cannot be traded… Then, if it has no use, it doesn’t matter whether it exists or not.”

Venezuela — world producer of bitcoins

However, precisely due to the country’s economic crisis and the devaluation of the bolivar, the national currency, Venezuela is producing between 16 and 25% of the world’s bitcoins. This is the first global cryptocurrency. Venezuelans are joining the crypto fever out of necessity and the government is slowly trying to monetize a system that can (and should) be its essential ally.

Since this March, for example, it has authorized the sending of remittances from Venezuelans abroad through cryptocurrencies (bitcoins or litecoins). Some businesses in eastern Caracas, traditionally the wealthiest area of the city, reflect how the virtual economy is being introduced little by little in the country.

© AFP 2018 / LEO RAMIREZ

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Various businesses adapt their transactions to mobile or electronic payments, and are forced to reinvent themselves due to the lack of cash on the street or to the technological instability of the system and continuous failures.This is the case, for example, with an ice cream shop which has introduced the DASH system so that its customers can buy ice cream with their cell phones through a QR code. The same thing has been done by a Chinese restaurant whose owners have implemented VIPPO, an application that allows mobile payments.

“Since we have decided to use VIPPO we have more clients now,” Carlos, the person in charge of the business, says.

The world of cryptocurrencies is intrinsically linked to technology. For a country like Venezuela, where a large portion of society has no access stable Internet or any smart device, the implementation of cryptocurrencies requires development of the country.

At the same time, because of low energy prices, this Latin American country is one of the most suitable for mining, i.e. the creation of digital money. The mining machines have to be connected around the clock to electricity and cooled with air conditioning, so they require a high level of energy consumption.

In Caracas, there is a shop that sells devices for mining. Many have decided to buy these devices so that they can basically produce money without doing anything. These machines cost between $80 and $1,200 and their average profitability is about $60 a month.

“Many foreigners are buying our machines to mine in Venezuela because of the low energy costs,” Christian, who is the manager of the shop, says. “Many Colombians or Brazilians buy these. In their countries, 80% of what they earn by mining goes to pay electricity bills.”

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In addition, since Nicolás Maduro announced the petro, mining cryptocurrencies is legal in Venezuela, unlike many other countries, where this practice is not allowed or remains in limbo in terms of its legality.But the alternative economy doesn’t only go through the world of the virtual in Venezuela. In one area of Caracas there is a market of fruits, vegetables and bread on Saturdays and Sundays; and since 10 December 2017 the main currency there is not the bolivar, nor is it even the petro or the bitcoin.

Instead it is the panal, which was born as a result of an initiative by Hugo Chávez several years ago. All the economic problems that the country is facing made it into a reality as of a little over a year ago.

“A panal equals 10 bolivars,” Bárbara Martínez explained. “We have printed 35,000 panals and now 60% of them are circulating… A printing company printed the money in exchange for sugar,” she said.

In this community, the panal is the official currency along with the bolivar. Nobody stops buying or selling something because there is no cash, the bank is closed or cards and the bank transfers don’t work.