Venezuela devalues its currency, pegs new fiat currency ‘Sovereign Bolivar’ to Petro cryptocurrency

In an unprecedented set of events that has transpired in the South American nation of Venezuela over the weekend, the country has devalued its currency by as much as 95% which makes it one of the biggest currency devaluations in history. Experts have warned that it will lead to higher levels of hyperinflation, as ordinary Venezuelans struggle to gauge the impact of this news. In addition, the nation is also launching a new fiat currency called ‘Sovereign Bolivar’ which will be backed by Petro cryptocurrency.

However, Petro has itself been deemed as illegal by many regulators in the country as they allege that the cryptocurrency is being used to mortgage the nation’s oil reserves. The oil-backed Petro was first announced in February this year in a bid to get around economic sanctions and raise capital for the cash-strapped nation. But the Petro doesn’t trade yet. Incidentally, Venezuela had offered India a 30% discount on crude oil if the payments were made in Petro.

The banks in Venezuela remained closed today as they prepare for the new ‘Sovereign Bolivar’ bills. While it is designed to stem the skyrocketing inflation, many experts have said that this new denomination will do nothing to arrest inflation. While Venezuela has raised the minimum wage by 3500% to roughly $30 per month, these measures may do little to alleviate the situation the country finds itself in.

The nation-backed cryptocurrency, Petro, is again in the news for all the wrong reasons. It almost seemed like the Venezuelan government wanted to use Petro as a get-out-of-jail-free card. Now, with many ICO rating sites giving the cryptocurrency a ‘scam’ status and government having no proof to the ‘$735 million dollars raised‘ claim, it remains to be seen if Petro can even remotely help the fledgling economy. Cryptocurrency is dominating headlines, yet again, for all the wrong reasons.

(Thumbnail image credit: Wikipedia)