The Venezuelan Petro’s alleged astronomical success could be under threat as US President Trump puts plans in process to prohibit American citizens from purchasing the digital currency.
It seems as if President Trump has thrown a cog in the apparent billion-dollar machine that is Venezuela’s Petro. According to Bloomberg, the US president issued a prohibition order on Monday banning the country’s citizens from going anywhere near the South American country’s first state-issued virtual currency.
To reinforce this, Trump has ordered Treasury Secretary Steven Mnuchin to issue any regulations required to enforce this ban.
The Role of the Petro
Venezuelan President Nicolás Maduro developed the Petro, which can be purchased through US dollars and euros, as a way to combat the country’s hyperinflation, which is expected to reach 13,000% in 2018. It is also being used as a way to circumvent US-imposed financial sanctions.
The latter, issued in August 2017, forbids Venezuela from borrowing any more money from the US, making refinancing its existing mountain of debt just about impossible. Even though the South American country is rich in natural resources, such as the crude oil used to back the Petro, it is poor in nearly everything else, which has resulted in its population suffering drastic food and medical supply shortages. The US imposed these sanctions in response to the deplorable humanitarian conditions in the country.
It’s a Hard No From the US
The US made its Petro feelings clear in January this year, referring to it as “another attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.”
US Vice President Mike Pence will also add his commentary to the situation during a speech on Wednesday at a session of the Organization of American States. Pence’s spokeswoman, Alyssa Farah, explained:
The Vice President will call on all members to increase pressure on the Maduro regime to restore the country’s democracy and address the humanitarian crisis unfolding in Venezuela.
Trump will be in Lima next month for the Summit of the Americas, where it is more than likely that he and his administration will discuss their plans for the Venezuelan government.
Possible Consequences
Russ Dallen, who is the Managing Director of Caracas Capital Market, an investment bank with offices in Venezuela, had this to say:
“It’s a pretty big blow. Since most cryptocurrencies are not actually backed by anything real, cryptocurrency speculation is based on the greater fool theory – I can buy this at $100 because there is someone who is a bigger idiot who is going to buy it at $200. When you take the US out of that equation, you reduce the interest and potential for that speculation.”
What effect do you think Trump’s ban will have on the Petro, and subsequently, on the Venezuelan government? Let us know in the comments below!
Images courtesy of Wikimedia Commons, Bloomberg, Flickr/Gage Skidmore