Venezuela’s New Cryptocurrency Is A Scam

02/25/201836 Comments

A perfectly predictable thing happened when the Great Oil Price Plunge of 2014 pulled the rug out from Venezuela’s oilconomy: Foreign creditors stopped lending to Venezuela, the debt-saddled government devalued the currency to cover budget deficits, inflation spiraled out of control (entering a death spiral last November), and, perhaps inevitably, the government defaulted on some of its $US bonds. (And all this amidst devastating US sanctions of the country.)

The result, as anyone who has been even casually following the headlines coming out of Venezuela has no doubt noted, has also been predictable: Chaos. Pandemonium. Desperation. People eating zoo animals. As I say, we’ve all heard the horror stories.

Another predictable outcome of this economic collapse: People started turning away from the bolivar and the increasingly-pricey US dollar as their preferred medium of exchange.

But here’s where things get interesting. When faced with this crisis, Venezuelans didn’t trade in their increasingly worthless government-issued fiat for gold and silver and other precious metals, but for bitcoin. That’s right, as the prices started to rocket out of the stratosphere, people found the loophole in the system (as they always do). Everything you need to survive in Venezuela is now cripplingly expensive: Food, clothing, medicine. But not electricity. Because of the country’s socialist policies, electricity is practically free. And practically free electricity in an inflation-ravaged country in this day and age can mean only one thing: Bitcoin mining!

And so it was that thousands of Venezuelans took to mining the cryptocurrency just as it was rocketing toward all-time highs, with a miner running powerful enough equipment able to make as much as $500/month via the operation, a small fortune in Venezuela in the early part of 2017 and a sizable fortune today.

Unsurprisingly, the government reacted to this development in the way that tyrants always react when a threat arises to their monopoly of power: They cracked down. In this case, the crackdown took the form of arrests and show trials of bitcoin miners, and now a national registry for all cryptocurrency miners (which, as you might imagine, is not being taken very seriously by the kinds of people who are turning to a central bank-less, borderless, decentralized online currency in the first place).

And now the Venezuelan government is pulling another tool out of its totalitarian toolbox. In the spirit of “If you can’t beat ’em, join ’em,” the government of Venezuela has just launched its very own cryptocurrency, the “Petro.” And while you’re still wrapping your head around that, there are reports that there’s a second cryptocurrency on the way next week!

As James Evan Pilato is often heard to remark on his own podcast: “What could go right?”

Learn about what the “Petro’s” whitepaper reveals about this government-issued scam coin in this week’s Corbett Report Subscriber newsletter.

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