Trump bans Venezuela's cryptocurrency Petro in the US

The White House has formally banned the state-owned cryptocurrency from US shores.
Written by Charlie Osborne, Contributing Writer

President Trump has announced a trading ban centered on Venezuela's state-owned cryptocurrency, the Petro.

On Monday, the US government released the details of a new executive order signed by US President Donald Trump which lists sanctions currently active against Venezuela.

The trade of cryptocurrency assets, including digital coins, is now included in the financial sanctions, set in place by the United States on the grounds of alleged corruption and drug trafficking within the Venezuelan government.

"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 9 January 2018, are prohibited as of the effective date of this order," the executive order reads.

The order refers to the Petro, a state-backed cryptocurrency which was first announced in December 2017.

Venezuelan President Nicolas Maduro revealed the cryptocurrency, touting the Petro as a way out of the country's economic crisis.

While government opposition deemed the digital coin as potentially unlawful, Maduro claimed that the cryptocurrency -- backed by the country's oil and precious metal reserves -- would be a means to circumvent sanctions and pump desperately-needed funds back into Venezuela.

The country is in the midst of an economic crisis. Economists predict Venezuela is on the verge of hyperinflation, with consumer prices set to soar by over 2,300 percent by next year. The region is also beset with increased levels of disease including TB, food shortages, increasing levels of crime and stagnant wages.

Venezuela's debt is estimated to have reached at least $140 billion.

Effective 19 March, residents of the United States are banned from purchasing the Petro coin from not only the government of Venezuela as an entity but any agency, investors, or cryptocurrency exchange offering the cryptocurrency.

Trump's order states that the update has occurred due to "recent actions taken by the Maduro regime to attempt to circumvent US sanctions by issuing a digital currency in a process that Venezuela's democratically elected National Assembly has denounced as unlawful."

Despite a lack of support from the government highlighted by the comments of one opposition MP, Angel Alvarado, who said Maduro was simply being a "clown," the president pressed ahead with his plans for Petro and called for other countries to adopt the digital coin.

The Petro coin's market presence is reportedly limited to 100 million tokens, valued at approximately $6 billion. Each Petro token is meant to be backed by a barrel of Venezuelan oil, worth approximately $60.

Maduro said that the Petro has secured $735 million in funding during pre-public sales, but there is no evidence to back the claim. Critics have called the Petro nothing more than an "illegal debt issue."

In a white paper (.PDF) released by Venezuela's government ahead of the public launch of the cryptocurrency, backers of the project said the coin would "serve as a platform for the growth of a fairer financial system that contributes to development, autonomy, and trade between emerging economies."

"Petro is a much more ambitious project than other digital convertible currencies such as the Digix (gold-backed) or the Tether (backed in dollars) because it opens the opportunity for using other assets to back up the currency," the paper states. "Due to the condition of crypto assets with state sanction (non-control) on its own platform, the instrument has a massive adoption potential, with an approximate of 31 million people in Venezuela alone, that is, ten times the size of the global market for cryptocurrencies."

As the Petro can only be purchased through the US dollar or the euro -- which effectively focuses the coin on foreign investors -- banning the cryptocurrency in the United States will be a severe blow to the project.

However, considering the virtual coin was launched as a way to dance around US sanctions in the first place, the US executive order is hardly a surprise.

The US Treasury Department warned investors back in January not to invest in the Petro, as this "would appear to be an extension of credit to the Venezuelan government." As such, the extension of credit would be a direct violation of economic sanctions imposed by the White House.

See also: Venezuela's cryptocurrency will be 'above the dollar' in value

Trump has demonstrated hostility towards the nation, calling for a "restoration of democracy" in Venezuela, and has also hinted at "further" action in the future.

Investing in any cryptocurrency, whether through token exchanges or Initial Coin Offerings (ICOs) is a risky endeavor without facts, background, and a coin's proven track record in the market.

The ban will almost certainly be a blow to Maduro's dreams, but it is not an impossibility that investors outside of the United States may take a gamble on the virtual asset. However, as with any speculative investment, caution is key.

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