Venezuela Approves Law Granting Legal Effect to the Petro

A government plan to counter economic sanctions is coming into force in Venezuela after parliament passed a law on crypto asset regulation. The law, originally proposed by the country’s leader Nicolás Maduro, gives legal effect to the petro, Venezuela’s multi-asset-backed digital currency.

Also read: Nigeria’s Opposition Leader Promises Cryptocurrency Policy If Elected President

‘Breaking Financial and Commercial Blockade’

In a statement released by the country’s Ministry for Communication and Information, the new law, approved by the National Constituent Assembly on Nov. 20, allows for use of the petro in commercial transactions inside Venezuela, including the acquisition of goods and services. The law consists of 64 articles and five transitory provisions, it said.

Andrés Eloy Méndez, head of the special commission on cryptocurrency regulation, is quoted in the Ministry’s statement as saying that “this law is fundamental to breaking the financial and commercial blockade imposed by the United States and other powers against Venezuela.”

He stressed that the petro will help “to establish new business relationships with the world” by circumventing the global banking system, which has been used by the U.S. government to enforce economic sanctions against Venezuela “and [to] forcefully subjugate the people.”

Venezuela’s national cryptocurrency went on sale on Oct. 29, but the only proof of ownership is a petro certificate of purchase issued by the state after full KYC procedures. The certificates also serve as a wallet after Google suspended the petro’s digital wallet.

Exodus to Cryptocurrency

In addition to a series of sanctions targeting some sectors of Venezuela’s economy, the U.S. has slapped top politicians in the oil-rich south American country, including president Maduro and his wife, with travel bans for allegedly plundering the national wealth and undermining democracy. Maduro says he is the victim of an “economic war” led by U.S.-backed adversaries.

However, under Maduro’s socialist government, inflation has spiraled to more than 200,000 percent, causing the local fiat unit, the sovereign bolivar, to become almost worthless. Basic foods and medicines, like rice and antibiotics, are increasingly difficult to obtain. That has driven a multitude of Venezuelans to the cover of cryptocurrency. And so has the government.

Since the idea of the petro was first announced a year ago, president Maduro has been at the forefront of actively promoting the cryptocurrency. He bought the petro when it officially launched, becoming one of the first top government officials to do so. The Venezuelan government is also planning to use the digital currency as a unit of account for oil trades under OPEC, a grouping of the world’s top oil-producing countries, as well as for paying civil servant salaries.

Eloy Méndez, the special commission head, noted that the petro is vital in the country’s economic recovery and growth objectives in the sense of facilitating the exchange and purchase of goods and services and for stabilization of the price of the sovereign bolivar against major currencies.

Do you think that the petro will be effective as a sanction-busting tool? Let us know in the comments section below.

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