The situation continues to be a dire one on the economic front for Venezuela as the Latin American country sinks into recession and complete insolvency. The latest development is embattled Venezuelan President Nicolas Maduro ordering the country’s banks to accept the state-backed Petro cryptocurrency as a unit of account. Intriguingly, Maduro has gone on a spending spree with money he doesn’t have by increasing the minimum wage, the price of petrol (which is still dirt cheap in the oil-rich country) and a hefty hike in VAT. These economic reforms, however, are conditional on the use of the Petro as the country’s currency.
The news came via a report on Channel News Asia, which indicated that Venezuela’s banking regulator, or Sudeban, has ordered that all banks in Venezuela must adopt the Petro as a digital currency. According to sources, the move, which was announced early this week, has the specific aim of alleviating the economic crisis which continues to plague the country and which has been going on for several years now.
The International Monetary Fund (IMF) estimated that the rate of inflation in Venezuela will reach 1 million percent before 2018 ends. So far, millions of residents have already fled to country to escape the crisis, while those who remained behind have turned to safe haven assets like cryptocurrencies to protect the wealth they have left. Interestingly the price of DASH, one of the go-to crypto of Venezuelans, soared considerably on Tuesday, and was up by over 30% on all cryptocurrency exchanges as news of its adoption in the economically broken country hit the headlines.
In response to the current situation, the central government rolled out new economic reforms, including a 3,400% increase in minimum wage, a VAT rate increase to 16%, and an increase in the price of petrol.
Maduro also announced the offering of gold-backed funds, which is aimed at promoting responsible saving strategies among Venezuelans. The initiative, which will allow citizens to buy lingoticos (little ingots), is scheduled to begin in mid-September. Maduro was quoted as saying on national television that gold cannot lose in its value.
The Petro coin was launched in February. Recently, Maduro mandated that it becomes the nation’s second national currency. The controversial digital currency is supposedly backed by the nation’s oil reserves. It has also been alleged that the initiative is a Russian-led experiment in evading U.S. economic sanctions.
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