Venezuela’s petro is more likely to imperil “legitimate” cryptocurrencies than to save the South American nation’s troubled economy, according to analysts at the Brookings Institute.
In an article published on its website last Friday, the century-old think tank cautioned that “there exists a very real danger that the petro will not only fail to cure Venezuela’s economic woes but will also weaken the integrity of cryptocurrencies writ-large.”
Brookings’ reasoning is that if the petro proves to be as worthless as the think tank’s analysts expect, “such realization and its aftermath may, unfortunately, contribute to the idea that cryptocurrencies facilitate fraud.”
Just as concerning, in Brookings’ view, is that if the petro turns out to be an effective way to thwart international sanctions, other countries may feel emboldened to use the technology to get around such blockades.
“The power of sanctions is in danger of eroding,” the article reads, adding:
“Other countries may feel emboldened to act more aggressively if economic sanctions can be thwarted through cryptocurrency sales.”
$5 billion in proceeds?
Last week, Venezuelan President Nicolas Maduro claimed that the petro had garnered more than $5 billion in an ongoing pre-sale.
He also declared that there were more than 186,000 offers to purchase the nominally oil-backed cryptocurrency.
While Maduro said the petro pre-sale buyers are entrepreneurs and other individuals from 127 countries, the Brookings Institute posits that the petro will provide “no real service for its international holders,” and is merely a “form of national illicit debt relief.”
This stands in contrast to “legitimate” cryptocurrencies, which provide “decentralized, secure and transparent transactions,” the researchers wrote.
“A hard line must be drawn on the development of empty cryptocurrencies that are ultimately a form of national illicit debt relief, or else serious and legitimate adoption of cryptocurrencies will be seriously stifled,” they concluded.
Nicolas Maduro image via Shutterstock.