After a five-year life span teetering on the brink of insubstantiality, Venezuela’s national cryptocurrency, the Petro, seems to be nearing its end.
This impending demise, as suggested by insiders, is set to be carried out by the Superintendency of Cryptoactives (Sunacrip), the authority vested with the task of overseeing the nation’s virtual currency realm.
The waning Petro and an unsettled crypto community
The blockchain of Petro, a cryptocurrency tethered to oil and mineral prices in Venezuela, has been recently implicated in a corruption scheme with PDVSA, the nation’s state-owned oil and gas company.
This alleged involvement added fuel to the mounting suspicions about the crypto asset’s stability when its blockchain operations came to an unexpected halt in late May.
The ripple effects of this standstill rattled the national and international crypto community, leaving them in a state of uncertainty.
Before this unsettling pause, PetroApp, a platform built for executing crypto-financial transactions, recorded a drastic depreciation in the Petro’s value by up to 45%. This downturn persisted despite the government portal maintaining the Petro’s public worth at $60 each.
Petro liquidation: Clearing debts and unraveling ties
Plans are now underway to extinguish the debts that the Venezuelan government owes to the Petro’s creditors, including leading department store chains that integrated Petro as a payment option. Despite the exact sums owed being undisclosed, it’s clear that the figures are significant.
The repayment method under consideration involves pegging the debts to the bolivar exchange rate, a move that could further dilute the value due to the local currency’s persistent devaluation against the US dollar.
The eventual dissolution of the Petro is akin to dismantling a 2018 economic proposal that envisioned a currency fortified by oil reserves.
The reality, however, as observed by cryptocurrency and finance expert, Aaron Olmos, is that the government could not maintain control over Petro, leading to its imminent liquidation.
A US-sanctioned cryptocurrency on the verge of extinction
The decision to dissolve the Petro might be tied to ongoing negotiations aimed at resolving the socio-political crisis in Venezuela.
Petro’s inception was met with stringent sanctions from the Donald Trump administration, which categorically prohibited transactions tied to the US financial system involving any digital currency issued by the Maduro government.
The Petro was initially conceived as an alternative payment system, finding its way into several critical transactions, such as passport renewals, bonuses, and payments for the Patria system beneficiaries.
However, all transactions concerning the Petro were conducted internally, with no official payments to allied countries.
Earlier this year, a corruption scandal implicating PDVSA and Sunacrip resulted in the appointment of Anabel Pereira Fernández as the head of a restructuring board at Sunacrip.
This move led to the freezing of several exchange accounts and cryptocurrency mining operations. In this tumultuous backdrop, the Petro’s operations took a hit, culminating in the suspension of its blockchain for a few days.
While transactions resumed in the following weeks, the confidence in Petro’s use and sustainability waned significantly. Experts anticipate that the Petro’s liquidation could take months until its use is completely phased out.
