Venezuelan President's controversial official exchange rate for state crypto

18 Aug, 2018
by Arthur Sillers
Venezuelan President's controversial official exchange rate for state crypto

Venezuelan president Nicolas Maduro has controversially pegged the price of the state sanctioned cryptocurrency to a specific value and exchange rate. This follows a number of legislative moves which indicate the government is trying to use cryptocurrency to create its new monetary architecture.

Venezuela has recently upgraded the status of its cryptocurrency, the Petro, to a second official currency, on par with the Bolivar, the national currency which is currently undergoing levels of inflation which render it unusable. Additionally, last week, speaking to Reuters, Hermann Escara announced that the Venezuelan administration is amending the central bank to include cryptocurrencies, effectively creating a centralized national exchange. These legislative turns follows reports that the Venezuelan government, in what they have termed “Operation Paper Hands,” shut down three separate crypto exchanges active in the South American country.

 Yesterday, Venezuelan President Maduro declared in a televised address his administration is enacting a single exchange rate between the Petro cryptocurrency and the Bolivar.

Economists who are monitoring the situation in Venezuela were quick to point out their skepticism, stating that because the value of the Petro is at a specific level, in this case around $60 USD, mandating an exchange rate effectively devalues the Bolivar even more, in this case by as much as 96%. Asdrubal Oliveros, a Venezuelan economist stated “Amid this aggressive devaluation and monetary expansions due to salaries and bonuses, we are expecting a much more aggressive stage of hyperinflation,” and the IMF predicts that inflation could be as high as 1 million percent by the end of this year.

Effectively, Maduro is trying to jump ship from one currency to another, and regional commentators do not have confidence that it will effectively improve the lives of the residents of Venezuela.

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