A U.S. Senate hearing has engaged in lively debate this week in condemning plans that could see the creation of a state-backed cryptocurrency in Venezuela.
At the hearing, organized by the Senate Committee on Banking, Housing and Urban Affairs, senior figures from the banking sector were invited to share their views on a range of issues, including proposals for new laws that would strengthen the position of industry regulators.
However, arguably the most intense discussions arose when questions were raised about the actions of the Venezuelan state and President Nicolas Maduro in preparing to launch a cryptocurrency backed by the country’s oil resources.
In particular, comments from the chairman of the CFTC J Christopher Giancarlo, and his counterpart at the SEC, Jay Clacton, singled out the Venezuelan plans for criticism, in response to questions from Senator Bob Menendez.
President Nicolas Maduro brought forward plans for the cryptocurrency, to be known as the ‘petro’, as a mechanism for evading U.S. sanctions and facilitating international trade. Backed by Venezuela’s oil resources, the cryptocurrency is set to be rolled out nationwide in the coming weeks.
The plan has met robust opposition from opponents in Venezuela, with claims that the scheme amounts to additional state borrowing, and must be presented to the Venezuelan parliament for approval.
Similarly, others have claimed that the Venezuelan government lacks the technological capacity and resources to execute on the model. Yet with the Maduro government keen to press ahead, the move is being watched internationally, including by the Russian government.
According to some reports, Russia could be considering similar proposals, and the issue of cryptocurrency usage to evade sanctions has become increasingly prominent in recent weeks.
Senator Menendez in particular has form for criticizing the petro, including comments in a letter written jointly with Senator Marco Rubio earlier this year.
“We have serious doubts about whether Venezuela has the capacity to launch a cryptocurrency,” the two wrote at the time. “But regardless, it is imperative that the U.S. Treasury Department is equipped with tools and enforcement mechanisms to combat the use of cryptocurrency to evade U.S. sanctions in general, and in this case in particular.”