Venezuela has been fighting their economic crisis now for quite a while now, and this most recent news from Wired did not make the situation better. The cryptocurrency, earlier created, petroleum backed that has now proved to be a scam on top of a scam.

Venezuela’s president Nicolás Maduro stated, a few days ago, that the country will go all-out on cryptocurrency to help the country escape the downward economic spiral it is currently caught in. Therefore, they intended to create the petroleum backed cryptocurrency Petro, as an official currency.

Even though the US president, Donald Trump banned Petro, they looked for other usage areas and offered India a 30% discount on crude oil if paid via the new cryptocurrency. Venezuela claimed that by 2020 Petro would be its official currency and expects a positive impact on the economy within three to six months of its launch.

However, now experts say that Petro is a scam on top of a scam. Cryptocurrencies may be highly volatile; bitcoin, for example, has fallen from its peak value of $19,000 in January to around $6,400 now. For consumers in Venezuela, however, this probably counts as fairly stable, given the hyperinflation pushing their country close to the brink of economic collapse. Logically, then, launching a cryptocurrency like the state-created Petro is a clever move, right?

The international monetary fund has forecasted that Venezuela’s economy will shrink 18% this year, while inflation might surge to 1 million percent. People are afraid, and 400,000 inhabitants have already crossed the border to Equador and Brazil.

The initial Coin offering of Petro was launched in December 2017, when cryptocurrencies were at an all-time high. The Whitepaper was vague, but the crypto world was curious. Was this the first time a government would launch a cryptocurrency?

“At least the Petro had some connection to the physical world. Compared to other things that were going on in crypto at the time, maybe it wasn’t that absurd of a concept after all,” says Aaron Stanley from blockchain firm Sweet bridge.

One Petro is supposed to get you $60 or 3,600 sovereign bolívars. It’s supposedly backed by oil barrels produced by the national oil company PDVSA; the catch: PDVSA also has debts amounting to $45 billion. And in real life, the Petro – crypto or not – doesn’t exist at all. “We have not seen a single Petro circulating, nor its smart contracts, or rules of the token, and much less its blockchain,” says Farias. Besides, Petro is banned from the international market.

There is no way it will work, the experts say, but Jonathan Fry from team blockchain says that desperate times with a starving population results in desperate actions.

“Cryptocurrencies are not all good, but they most definitely have a place and are a new asset class, no way to get around that”, says Fry.

Maybe the collapse is inevitable for Venezuela and that no currency in the world could change the economics course. The future will prove how things work out.

Image Source: “Flickr”