Venezuela

In Washington, Venezuela’s plan to create a ‘Bitcoin’ seen as a sign of desperation

Venezuelan President Nicolás Maduro speaks at an Oct. 17 news conference at the Miraflores presidential palace in Caracas. On Sunday, Maduro announced the launch of a new digital currency called the “Petro”.
Venezuelan President Nicolás Maduro speaks at an Oct. 17 news conference at the Miraflores presidential palace in Caracas. On Sunday, Maduro announced the launch of a new digital currency called the “Petro”. AP

Venezuela’s announcement that it plans to launch a national crypto-currency to evade U.S. sanctions has been met with skepticism in Washington, where lawmakers see the proposal as a sign of the regime’s increasing desperation.

Several days after Venezuelan President Nicolás Maduro proclaimed that a new digital currency he dubbed the “Petro” would help the country skirt U.S.-led financial sanctions, members of Florida’s congressional delegation said the proposal was a sign that the tough economic measures are working.

“Dictator Nicolás Maduro has recklessly led his country to turmoil and poverty, and this is just his latest attempt to continue to undermine democracy and the will of the Venezuelan people,” Sen. Marco Rubio, a vocal critic of the Maduro regime, said in an e-mail. “Clearly, U.S. sanctions against human rights violators and corrupt Venezuelan individuals are working, and Maduro and his cronies are getting more desperate every day.”

Rep. Ileana Ros-Lehtinen echoed Rubio’s comments. “It’s unbelievable,” she said. “He’s so desperate to get out of sanctions and we’re so desperate in looking for ways to punish him and help the people of Venezuela.”

Although Maduro did not go into detail about how the Petro would work, he said in a television address on Sunday that it would have the backing of the country’s oil and mineral reserves. Crypto-currencies, like Bitcoin or Ethereum, typically aren’t backed by governments or central banks.

You’re talking about a regime that has in essence gotten the country with the largest oil reserves on the planet, one of the wealthiest countries in the world, and transformed it into one of the poorest

Rep. Mario Diaz-Balart

Lawmakers expressed doubts that the Venezuelan government — which has been unable to stem the hyperinflation of the country’s national currency, the bolívar — would be capable of creating a viable crypto-currency.

“You’re talking about a regime that has in essence gotten the country with the largest oil reserves on the planet, one of the wealthiest countries in the world, and transformed it into one of the poorest where you have shortages of basic needs including medicine and food,” said Rep. Mario Diaz-Balart.

Patrick D. Duddy, the former U.S. ambassador to Venezuela from 2007-10, was also skeptical that anything would come of Maduro’s announcement. “They have been able to sell oil to us as well as a variety of other clients and yet their economy has essentially collapsed,” he said. “This does not argue for optimism as you regard a nearly unprecedented project like creating a new currency.”

The State Department would not say whether it believes Venezuela is capable of creating the Petro.

“We will not speculate on the Maduro government’s capacity to develop a cryptocurrency,” a spokesperson said in an e-mail, adding that Maduro has overseen “the long-running and complete collapse of the Venezuelan economy.”

While regulators debate the pros and cons of bitcoins, the rising real-world value of this digital currency inspires the question: What makes money, money?

While Venezuela might be able to set up the technology needed to trade with digital currencies, experts said the success of the Petro would depend on others’ willingness to use it. And given Venezuela’s current economic situation, the Petro is unlikely to be popular.

“Who would actually use a Venezuelan crypto-currency, honestly?” said Eric Farnsworth, the Vice President of the Council of the Americas. “Only the most desperate or the most lawless would try to avail themselves of this.”

There are also questions about whether the Petro would actually enable Venezuela to circumvent sanctions.

The Trump administration imposed economic sanctions against Venezuela in August, banning debt trades for bonds issued by the government and its state-owned oil company. The U.S. has also sanctioned dozens of Venezuelan citizens, including Maduro.

A spokesperson for the U.S. Treasury Department said the sanctions would apply regardless of whether a particular transaction is carried out using digital currency, but declined to comment on what additional steps, if any, U.S. authorities would take to enforce sanctions if Venezuela created a crypto-currency.

“While Treasury does not comment on investigations or telegraph prospective actions, we will continue to use our authorities to maintain pressure on the Maduro regime and its supporters to change their behavior,” the spokesperson said in an e-mail. “As we see evidence of sanctionable conduct or attempted evasion of our sanctions, we will take action as appropriate.”

Even if Venezuela were able to develop the Petro and find people willing to use it, the crypto-currency likely wouldn’t help the country circumvent sanctions, said Yaya Fanusie, the director of analysis at the Washington-based Center on Sanctions and Illicit Finance, part of the nonprofit Foundation for Defense of Democracies. Most crypto-currencies are traceable and their use isn’t widespread enough to help authoritarian regimes skirt far-reaching sanctions.

Instead, Fanusie said Maduro’s claim “sounds like populist rhetoric to convince people to stop using Bitcoin,” which has become increasingly popular in Venezuela as the value of the bolívar continues to plummet.

This is yet another possibility to create another incredibly nontransparent business like playing with the exchange rates, laundering money and contraband gasoline

Pedro Burelli, a former board member of the Venezuelan state oil company

But while it might not help Venezuela get around sanctions, a state-sponsored crypto-currency could provide a new opportunity for corruption.

“This is yet another possibility to create another incredibly nontransparent business like playing with the exchange rates, laundering money and contraband gasoline,” said Pedro Burelli, a former board member of the Venezuelan state oil company and a critic of the Maduro regime.

Farnsworth pointed to the corruption within the country’s current currency exchange system and said a crypto-currency could provide another similar opportunity. “The potential here for massive corruption is huge and Venezuela has become a society that’s really overtaken by corruption,” he said.

Venezuela isn’t the first country to float the idea of a national crypto-currency. Earlier this year, reports surfaced that Russia was discussing plans to create a CryptoRuble.

There’s also evidence to suggest North Korea is targeting digital currency exchanges to steal crypto-currency and exchange it for hard currency in an effort to circumvent sanctions, said Luke McNamara, a senior intelligence analyst at the cybersecurity company FireEye.

“They’re under increased economic pressure because of sanctions,” McNamara said. “There are very few avenues for them to bring in hard cash.”

It’s possible Venezuela could seek help from another country in developing its own crypto-currency, Fanusie said.

And while lawmakers and experts in Washington don’t see the Petro as an immediate threat, Ros-Lehtinen didn’t entirely discount the possibility that Venezuela could find a way to launch a crypto-currency.

“When you’re the dictator, you can pull anything off,” she said.

Miami Herald staff writer Jim Wyss contributed to this report

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