Venezuela’s President Nicolas Maduro (Photo: Getty Images/Fedrico Parra)
The U.S. executive branch issued an executive order prohibiting the use or purchase of Venezuela’s Petro cryptocurrency, claiming the currency was issued unlawfully in an effort to circumvent U.S. sanctions against Venezuela, and in particular the President Nicolás Maduro’s regime.
“All transactions related to, provision of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018, are prohibited as of the effective date of this order,” the executive order reads.
The ban comes after Maduro created the cryptocurrency in an effort to stem the tide of rapidly rising inflation. According to Bloomberg, the inflation rate will likely hit 13,000 percent by the end of 2018. The destabilized economy has created a humanitarian disaster and the oil-backed cryptocurrency reportedly hasn’t helped matters — despite Maduro’s claims to the contrary.
“President Maduro decimated the Venezuelan economy and spurred a humanitarian crisis. Instead of correcting course to avoid further catastrophe, the Maduro regime is attempting to circumvent sanctions through the Petro digital currency — a ploy that Venezuela’s democratically elected National Assembly has denounced and Treasury has cautioned U.S. persons to avoid,” U.S. Treasury Secretary Steve Mnuchin said.
Whether or not this will actually have an effect on cryptocurrency markets remains to be seen. Maduro claimed to have sold around $5 billion in Petro cryptocurrency, but it’s unclear if that is actually true, or if it was a statement made to drive up interest.
“Since most cryptocurrencies are not actually backed by anything real, cryptocurrency speculation is based on the greater fool theory — I can buy this at $100 because there is someone who is a bigger idiot who is going to buy it at $200. When you take the U.S. out of that equation, you reduce the interest and potential for that speculation,” Russ Dallen of Caracas Capital told Bloomberg.
What does this all mean for you? Well, as long as you don’t have any of Venezuela’s Petro in your portfolio, you don’t have anything to worry about. If you do, you might be stuck with it, because this executive order makes it very clear that any transaction involving Petro — even selling it as a result of this ban — is currently prohibited for U.S. citizens.
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