Cryptocurrency

Venezuela orders passport fees to be paid in Petro, its state-issued crypto

October 7, 2018
Giancarlo Roma

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Venezuela orders passport fees to be paid in Petro, its state-issued crypto

In a press conference on Friday, Venezuelan vice president Delcy Rodriguez announced that the country’s state-created cryptocurrency, the Petro, would be the only form of payment accepted for passport fees. As of Monday, a new passport will cost two petros, and an extension will cost one.

Venezuela’s national currency, the bolivar, has suffered greatly from inflation. As recently as July, a cup of coffee cost 2,000,000 bolivares, up about one thousand times from a year to date. In response, president Nicolas Maduro removed five zeros from the bolivar, replacing the old currency (the bolivar fuerte) with a new one (the bolivar soberano, meaning “sovereign”) on August 20th. The move seemed to address the problem in name only, and failed to solve any of the root causes of the country’s inflation.

Last year, Maduro announced the development of the Petro, which was designed to support the bolivar, and counter its rampant inflation. The announcement came in December, at the height of the crypto bubble that ultimately popped. Still, the news seemed generally positive for the crypto space — acceptance not merely on an institutional level, but a national one. What’s more, the coin was, in theory, tied to something tangible, and not a fledgling business, or the promise of one, as is the case with many coins.






However, since then, the coin has come under intense scrutiny. The Petro was meant to be worth by 3,600 bolivars, and backed by oil barrels produced by the state’s national oil company, PDVSA, as well as gold and diamonds — in other words, hard assets. However, the region Maduro promised was overflowing with 5 billion barrels of oil, and would provide the oil production to back the Petro, has seen no efforts to tap into those reserves. The only town in the remote area, Atapirire, is home to 1,300 residents, and more closely resembles a ghost town than an industrial center.

But it’s not just the underlying value of the Petro that has failed to stand up to examination; the technology itself seems to be questionable as well. Earlier this month, Ethereum developer Joey Zhou pointed out that the Petro’s whitepaper had been copied, in part, from Dash’s GitHub.

https://twitter.com/josephzhou/status/1047222363425787904

The U.S. has taken a strong stance against the Petro from the outset. In a bill introduced on September 24th, a group of U.S. senators, including Marco Rubio, Ted Cruz, and Tim Kaine, pushed for stronger sanctions against the Petro, even after U.S. president Donald Trump imposed sanctions on the currency in March.

The announcement that the Petro would be the only acceptable means of payment for passport fees shows the Venezuelan government is doubling down on its support for the coin. However, from all other vantage points, it seems like an ill-conceived, convoluted means of rescue a flailing economy.