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Letters From Venezuela: State-Backed Crypto Petro Used for Govt Services, a Casino, & Hodl Hodl

TL;DR: Letters from Venezuela is an exclusive CoinSpice series, an inside look from a reporter on the ground, documenting the South American nation’s last stand among sanctions, political unrest, international condemnation and concern, economic collapse, and the specter of cryptocurrency possibly demonstrating its main use case. In this installment, the Venezuelan government pumps its national cryptocurrency, Petro, through forcing its usage in paying for state services and launching a casino; and P2P crypto exchange Hodl Hodl makes petro available as a payment method.

State Services to be Paid in Petro

President Nicolás Maduro took another step toward making the petro a relevant currency within the ailing country. His recent Executive Order published recently forces state-provided services to be paid in petro. Specifically, the payments of all identity-related documents, like IDs and passports, documents regarding purchases and sales of vehicles and rent contracts, jet fuel and international port expenses, will have to be settled in petro. Maduro made this announcement while giving his annual report and accounts presentation to the National Assembly. He declaring these were among the first steps to get mass adoption of the petro established in the country while also hoping to create international institutional demand for the government-backed crypto asset.

hodl hodl
President Nicolás Maduro addresses the National Assembly

After having also announced some of the oil produced in the country would be paid for using petro, news covered in an earlier Letters From Venezuela article, Maduro officially stated how more than 4.5 million barrels will be sold for petro, starting with exploratory sales of 50,000 barrels daily, moving towards selling the nation’s entire oil production in the official cryptocurrency. If true, this would be the first settled cryptocurrency high volume commodity sales of its kind.

The transition toward Maduro’s stated goals, however, is already causing trouble at an operative level in ports and other government dependencies still ill-equipped and unprepared to start collecting services in petro. While some registries have answered to the requirements and adapted their respective systems to collect payments in this manner, the vast majority are still collecting payments in bolivares. Accepting petro as a unit of account to calculate the exchange rate is proving difficult, as a report from a local outlet discovered this week.

Casino Socialism

Some companies have stopped buying oil exports altogether due to the new petro requirement. According to an article published by Bloomberg, exports of at least 1 million oil barrels were put on hold as a consequence. Foreign companies are reticent to do business with Venezuela and especially by using the petro due to the current US presidential administration’s outright ban on both. While the report itself did not identify the companies behind the troubled exports, it’s clear that buyers of Venezuelan oil are taking a wait and see approach, fearing sanctions and repercussions if they do engage in petro-based payments. This could create yet another barrier for Venezuelan oil and commodities to get to their final destinations.

In the midst of it all, construction of a casino that would use both petro and foreign currencies was also announced by Maduro, who said profits generated will be used for health and education-related expenses. The casino will be placed in the Humboldt hotel, located in the capital of the country, Caracas, and it will allow bets in international currencies, as well as in petro. All of these rapid-fire new announcements seem directed at obtaining as much foreign currency as possible via sale of petro, as the country’s foreign reserves are hitting all-time low volumes, also reported by Bloomberg. The coffers of the Treasury hold less than one billion dollars in liquid assets, with the whole stash being just a little over six billion dollars, including 3.6 billion dollars in gold held in the capital, and 1.6 billion locked in the vaults of the Bank of England currently not available to the Venezuelan government under sanctions.

Meanwhile, Hodl Hodl, a P2P cryptocurrency exchange similar to LocalBitcoins, included the option of using petro as a means of payment to acquire other cryptocurrencies within their platform. It’s one of the first international forays of interest for the petro. A Hodl Hodl user, “Mauricio,” was reportedly the first to make a trade involving the purchase of BTC with petro, according to Decrypt. This is not the first time a petro transaction was conducted on a P2P market. There were several trades conducted using LocalBitcoins that traded petro for BTC. However, LocalBitcoins, located in Finland, started enforcing stringent KYC policies, something that negatively impacted practical use of the popular P2P platform in Venezuela. While some users were worried about the possible sanctions Hodl Hodl would face by integrating petro payments, the UK-based exchange stressed through its Twitter account how they have no connection with US service providers.

Other centralized exchanges so far haven’t been interested in listing the petro. Last year, crypto exchange Bitfinex, issued a statement about the Venezuelan cryptocurrency, declaring they “will not list or transact the [petro] or other similar digital tokens,” suggesting it was merely a way of sidestepping economic sanctions and ultimately having “limited utility.”

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