US President Donald Trump issued an order on March 19 to effectively disallow American investors from participating in the initial coin offering (ICO) of the Venezuelan Petro, a cryptocurrency supposedly backed by the country’s oil reserves.
Caracas Capital managing director Russ Dallen told Bloomberg that the prohibition of investment in the Venezuelan Petro will lead to the decline in speculation and interest towards the cryptocurrency. Dallen noted:
“It’s a pretty big blow. 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.”
G20 and sanctions
President Trump has approved Treasury Secretary Steven Mnuchin to enforce any regulation or policy to ensure that US-based investors are barred from purchasing the Venezuelan Petro. The decision of the US government to prohibit investment in the Venezuelan cryptocurrency was likely influenced by the additional sanctions imposed on four more government officials at the G20 summit.
The sanctioned officials are vice minister of internal commerce Willian Antonio Contreras, head of national treasury Nelson Reinaldo Lepaje Salazar, National Bank of Housing and Habitat director Americo Alex Mata Garcia, and former president of Venezuela Institute of Social Security Carlos Alberto Rotondaro Cova.
During a meeting with financial authorities and leaders from the world’s 20 leading economies, Mnuchin emphasized the US needs to combat the “kleptocracy of the Maduro regime,” as he stated:
“President Maduro decimated the Venezuelan economy and spurred a humanitarian crisis. Instead of correcting its 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.”
The imposition of new sanctions against Venezuela at the G20 Summit and the US government’s strict prohibition of investment in the country’s state-issued cryptocurrency could be expected to disarrange most of the Venezuelan government’s existing plans to grow its cryptocurrency and raise even more capital through a second ICO.
After reportedly raising over $5 bln from the Venezuelan Petro token sale, which would make it the biggest ICO to date overtaking the $2 bln Telegram ICO and $1 bln token sale of EOS, Venezuelan President Nicolas Maduro announced on February 21 that the country is preparing to launch yet another cryptocurrency called Petro Gold, a cryptocurrency that is backed by Venezuela’s reserve of precious metals.
“Next week I’m going to launch the Petro Gold, backed by gold, which is even more powerful, that will strengthen the petro,” said Maduro in a televised speech covered by Reuters.
President Maduro did not offer any additional information on the Petro Gold and continued to pursue the path of issuing new cryptocurrencies to cover the country’s debt. Opposition leaders within Venezuela criticized Maduro’s approach in handling the economic crisis of the country, describing the issuance of Venezuelan Petro and Petro Gold an “illegal debt issue.”
Investors who participated in the Petro token sale with US dollars and euros, also expressed their concerns about the solvency and transparency of the country’s government, specifically after it was revealed that the official whitepaper of the Venezuelan Petro did not guarantee token holders with the ownership of the country’s oil reserves…