CARACAS (Reuters) – Venezuela's plan to create an oil-backed cryptocurrency faces the same credibility problems that persecute the ruling Socialist Party in financial markets and is unlikely to do better than the OPEC member itself , say investors and technical experts.
President Nicolas Maduro published a plan on Sunday to create the "petro" backed by the world's largest oil reserves, in the midst of a paralyzing economic crisis worsened by US sanctions that limit Venezuela's ability to borrow money.
Cryptocurrencies depend on trust in clear rules and equal treatment for all involved, said three experts, adding that Venezuela is widely viewed as a disrespect for basic property rights and mismanagement of its existing bolivar.
Without that confidence, the "petro" would not help Venezuela to raise funds or avoid the sanctions imposed by the government of the president of the United States, Donald Trump.
"If any government is willing to establish a fair set of rules for a cryptocurrency, it would be great," said Sean Walsh of Redwood City Ventures, an investment firm focused on blockchain and bitcoins.
"But if an administration has a record of unfair treatment of the population, then using a buzzword like & # 39; cryptocurrency & # 39; will not change that behavior."
The Ministry of Information did not respond to requests for comments.
Bitcoin, the world's most popular cryptocurrency, has soared in recent weeks to almost $ 12,000 BTC = BTSP in what critics call evidence of a bubble, but supporters insist on the start of a new monetary system that it does not depend on central banks.
Venezuela's inflation is expected to exceed 1,000 percent this year, driven by a rampant expansion of the money supply and a monetary control system that critics say provides favorable treatment for well-connected officials and businesspeople at expense of ordinary citizens.
& # 39; TRY IN VENEZUELA? & # 39;
Under the 15-year exchange regime, state agencies receive dollars to import food and medicine at a rate of 10 bolivars, while private citizens now pay more than 108,000 per dollar on the black market. The black market rate has depreciated more than 99 percent under Maduro.
Basic food and medical items are increasingly out of reach for most citizens, fueling malnutrition and preventable diseases. Maduro says that the country is the victim of an "economic war" led by political opponents with the support of Washington.
Maduro has not delineated the rules that would govern the proposed currency, including the rights that its holders would have over Venezuela's oil reserves.
"The fact that the value of the bolivar has collapsed shows that people have very little faith in Venezuela," said Yazan Barghuthi of the Jibrel Network, a blockchain development company.
"A tokenized asset will continue to have the same problem: Do we trust the institution that supports this to fulfill the promises that this token represents?"
U.S. The sanctions, in response to accusations of human rights violations and the weakening of democracy, have effectively blocked the country from issuing new debts and have made global banks increasingly cautious to work with Venezuela.
But Venezuela is unlikely to find foreign companies willing to accept payments for food or medicine in newly minted petros and has little chance of convincing creditors to accept them instead of dollars when making payments on their distressed bonds, said the experts.
"Given that there is no stable judicial system in Venezuela, nobody will trust anything the government claims is backed by assets of any kind," Marshall Swatt, founder of Bitcoin exchange Coinsetter, wrote in an email.
"Even if technology were adequate and prevented government interference (impossible to imagine), it is dead on arrival"
Report by Brian Ellsworth; Lisa Shumaker edition