Venezuela Shuts Down Petro Cryptocurrency Amid Scandal

Venezuela has announced the cessation of its petro cryptocurrency, a digital asset introduced by President Nicolas Maduro in 2018. The petro was intended to circumvent U.S. sanctions but struggled to gain traction and was mired in corruption allegations. The only trading platform for petro, the Patria Platform, will shut down all crypto wallets on January 15, converting any remaining petros into the struggling local currency, bolivars.

Launched amidst fanfare, the petro was backed by Venezuela’s oil reserves and initially priced at $60 per unit. Maduro’s vision was for the petro to facilitate new forms of international financing. However, widespread adoption never materialized, as citizens found the cryptocurrency challenging to use and it was labeled a “scam” by some risk assessment agencies.

Efforts to boost the petro’s use included mandatory payments for state services like fuel and passport fees, but its application remained largely restricted to certain state operations like tax payments. The government’s push for banks to display balances in both bolivars and petros did little to increase its practicality.

The Patria Platform, predominantly used for government subsidies, allowed petro-to-bolivar exchanges only through an auction system. Despite these measures, the petro’s adoption remained limited, leading to its official demise as declared by private platform CryptoLand Venezuela.

The final blow to the petro was a corruption scandal involving irregularities in managing oil operations funds with crypto assets. This scandal prompted the resignation of Petroleum Minister Tareck El Aissami and the arrest of several officials, including the top management of the Sunacrip crypto regulator. It also led to a clampdown on bitcoin mining in Venezuela, where other cryptocurrencies have been popularly used as a hedge against hyperinflation and the devaluation of the bolivar.

According to a 2022 United Nations Conference on Trade and Development survey, 10.3% of Venezuelans owned crypto, higher than the percentages in the U.S. and the U.K. The petro’s failure underscores the complexities and challenges of introducing a state-backed cryptocurrency in a volatile economic and political environment.