The Petro Experiment Might Not be Doomed Just Yet

bank of venezuela

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The Bank of Venezuela, Venezuela’s largest banking institution, has provided support for Petro, the digital asset sponsored by the country’s government. 

Late last week, tech news medium Decrypt reported the development, claiming that the bank has provided a new section on its online banking platform that’s dedicated to cryptocurrencies. 

As at press time, the cryptocurrency section caters to just Petro. However, as the news outlet points out, that the section seems to be under development, and support for other crypto assets could be on its way. 

Petro was launched back in 2017, with the asset’s value being pegged to Venezuela’s oil reserves. Amongst other things, it was an effort by the Nicolas Maduro administration to circumvent any economic sanctions imposed on it by the United States government. 

However, things haven’t particularly gone the way of the government. Petro has seen very little adoption from both within and outside Venezuela, thanks in part to restrictions from the United States Treasury Department. 

Facing no other option, Maduro turned to brute force. In July, the president ordered the Bank of Venezuela to begin accepting the asset at all of its branches. Now, it would seem that the bank has chosen to comply; a development which would be music to Maduro’s ears. 

The operation of Petro has also been indicative of how much Venezuela has come to rely on digital assets in the face of looming economic sanctions. The bolivar, Venezuela’s national currency, has been affected by ballooning inflation levels. Thus, crypto enthusiasts have been left with no choice but to turn to peer-to-peer crypto exchanges. 

LocalBitcoins, the most popular of these exchanges, recently revealed that Bitcoin transactions levels in the country had reached record levels. For the week of August 24, the volumes increased 50 percent, going from 77.46 billion bolivars (about $3.62 million) to 116.87 billion bolivars (about $5.46 million) the following week.

However, the boost in Bitcoin reliance could also just be citizens following the footsteps of the government. In late July, ABC Spain reported that the government had started using Bitcoin to make collect aviation tax revenues. 

Per the report, the government uses an app (known as Jet Man Pay) to collect tax revenues in Bitcoin. The Bitcoins are then transferred to cryptocurrency exchanges based out of Russia, Hungary, and China, where they are converted to dollars and deposited in government-controlled bank accounts in the countries. 

ABC Spain reported that the strategy was being tested at the Maiquetia International Airport (IAM), a popular airport located near Caracas the medium added that Maduro was planning to expand the policy to cover other major airports, thus providing a reliable means of maintaining tax collections. 

Now that the Bank of Venezuela is accepting Petro, we could see Bitcoin trading levels seeing a drastic reduction. The Bank of Venezuela is no doubt an influence in the financial world, and its acceptance of Petro will undoubtedly spur other banks in the country to do the same. It’s a cascade of events that will lead to Petro being accepted at shopping malls, retailers, and other outlets. 

More Petro transactions will increase its adoption, thus forcing more people to abandon Bitcoin and focus more on their national crypto asset. 

Perhaps the Petro experiment could succeed after all. If it does, Venezuela could serve as a positive example for other sanction hit countries on how they could keep financial activities (and in the long-run, their economies) alive with crypto. 

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About Jimmy Aki

Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.