July 1, 2022

Reuters special report challenges viability of Venezuelan cryptocurrency

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By Youri Kemp From Caribbean News Now

CARACAS, Venezuela — A special report by Reuters news agency on August 30, 2018, said the Venezuelan cryptocurrency, the Petro, announced by the government in December 2017 and launched in February 2018 by embattled president, Nicholas Maduro, has no evidence of viability or of it being established in any way as originally envisioned or promoted.

Maduro said he would launch the Petro, backed by oil reserves, and linked it to a small town called Atapirire, which boasted of having some 5 billion barrels of oil to be exploited for this purpose.

However, Atapirire residents say they have seen no efforts by the government to tap those reserves. And they have little confidence that their struggling village has a front-row seat to a revolution in finance.

Over a period of four months, Reuters’ journalists spoke with a dozen experts on cryptocurrencies and oilfield valuation, travelled to the site of the pledged oil reserves and scoured the coin’s digital transaction records in an effort to learn more.

The hunt turned up little evidence of a thriving Petro trade. The coin is not sold on any major cryptocurrency exchange. No shops are known to accept it.

A Caribbean News Now report in January 2018 suggested that this was likely to be the fate of the Venezuelan Petro. Not only was the Petro not backed by the parliament, which flatly called its introduction illegal, but cryptocurrency traders and analysts said that a Venezuelan cryptocurrency backed by oil was meaningless and unnecessary.

More importantly, with sanctions crippling the country, any serious cryptocurrency provider, platform or exchange would be hard pressed to support it or its usefulness – something that the Maduro regime wants in order to bypass US sanctions.

Oil production in Venezuela has stalled as well. OPEC’s production report for July 2018 stated that oil rigs have been closing down across the country, as well as production being way down on a month on month basis.

In addition, as international sanctions put a stranglehold on the way Venezuela can make money from its oil and natural gas, the country is left with crumbling assets and little to no headroom for repairs and security of the production and transportation of oil and oil by-products.

Analysts are also expecting Venezuela’s crude-oil exports to drop by a third in September because of a tanker collision at state-owned PDVSA’s main terminal, possibly leading to a force majeure declaration.

The Greek-flagged Meganisi, carrying imported naphtha, collided with the terminal’s south dock during mooring operations last weekend. The accident reduced the terminal’s 1.5 million barrels per day (b/d) capacity by up to 425,000 b/d or a projected 15.7 million barrels over a five-week period through September.

Incidents like this, in addition to the re-routing of oil tankers to dodge countries that have joined in the sanctions, including Curacao, have forced an already crippled and cash-strapped Venezuela into an even more dangerous path as it looks to countries like Cuba to re-export their oil to markets, in non-conventional ways and means that are not subject to safety approvals or quality standards.

Equally important, Venezuela and the state-owned oil company, PDVSA, have been known to dodge bills and leave contractors seeking international arbitration and support to be repaid the monies owned to them by the company and, by extension, the government of Venezuela.

Reuters also dug further into the efficacy of the Petro as promoted by the Maduro regime in that it was being backed by of oil reserves and production capacity. Senior government officials have given contradictory statements on the matter of where the Petro is being managed, how much money is being raised and where the money is going.

Maduro said Petro sales have already raised $3.3 billion and that the coin is being used to pay for imports. But Hugbel Roa, a cabinet minister involved in the project, told Reuters on Friday that the technology behind the coin is still in development and that “nobody has been able to make use of the petro … nor have any resources been received.”

The Superintendence of Cryptoassets, the government agency that oversees the Petro, is a mystery. Reuters recently visited the finance ministry, where the Superintendence is supposed to be housed, but was informed by a receptionist that it “does not yet have a physical presence here.”

Maduro announced on April 26 that 16 exchanges had been “certified” to trade the Petro, adding “they begin operating as of today.” Most are little-known in the crypto world.

Reuters could not locate seven of the exchanges, which had no internet presence. Seven others did not respond to requests for comment. Italcambio, an established Venezuelan currency exchange that Maduro said would trade the coin, does not manage or sell Petros, its president Carlos Dorado said in an emailed response to Reuters.

The only exchange that has publicly discussed plans to list the Petro is India’s Coinsecure, leading to suggest what analysts have said from the outset, namely, that no one would want to trade or be held liable for a Venezuelan cryptocurrency due to the risks and possibility of it defaulting or reneging on its obligations.

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