The Petro was meant to boost Venezuela’s economy, but it’s faced harsh criticism at home and abroad.
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President Donald Trump signed an executive order on Monday banning American citizens from using the Venezuelan government’s bespoke cryptocurrency, called the Petro. It’s the first time a US president has banned a cryptocurrency.
The Petro is Venezuelan President Nicolás Maduro’s attempt to financially boost his country’s struggling economy, and Maduro claimed that digital token sales (which were open to non-Venezuelan investors) raised more than $700 million USD after a pre-sale in February. Petro tokens are based on distributed ledger technology, similar to Bitcoin. The Venezuelan government intends to accept them as payment for services and will encourage merchant adoption.
The Petro has been extremely controversial since its value is pegged—by the government—to the value of Venezuela’s oil reserves. Legislators in the Venezuelan government have called it an attempt to “illegally” cash in on oil that’s still in the ground.
Trumps signed an executive order on Monday that “prohibits, as of its effective date, 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,” which would certainly cover the Petro since its pre-sale took place in late February. The order authorizes authorized Treasury Secretary Steven Mnuchin to issue any necessary regulations to enforce of the ban in consultation with the Secretary of State.
Read More: Venezuela’s ‘Petro’ Launch Was Amateur Hour
Somewhat ironically, escaping US economic control was one of the Venezuelan government’s stated reasons for inventing a cryptocurrency.
The Trump administration has been weighing sanctions against Venezuela in protest of that country’s upcoming April election, in which Maduro will seek another term in office. Maduro has been in power since he was narrowly elected in 2013. LIke his predecessor, Hugo Chavéz (with whom Maduro shares a socialist bent), the current president is often described as a “dictator” or a strongman in Western media. On his watch, Venezuela has descended into troubles that include regular rolling blackouts due to stress on the power grid, as well as food and medicine shortages.
"While Venezuela's attempt to issue a cryptocurrency is novel, there's nothing new about the US restricting financial dealings with sanctioned countries. Issuing a cryptocurrency is not going to help Venezuela escape sanctions,” Jerry Brito, executive director of cryptocurrency policy think tank Coin Center, said in a statement.
Information on the order is scarce at the moment, and it remains to be seen how the US government intends to enforce a ban on using a cryptocurrency. Cryptocurrency addresses are anonymous by default, and transactions are irreversible, making it extremely difficult if not impossible to censor a cryptocurrency short of taking away someone’s internet and all their devices—this is one of cryptocurrency’s biggest selling points. The Venezuelan government issued the Petro during its pre-sale through its website, however, and websites can be blocked by service providers.
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