An executive order (EO) was released by President Trump this Monday banning U.S. citizens from purchasing the petro – a cryptocurrency launched by Venezuelan President Nicolas Maduro in an effort to save his country’s fledgling economy. Venezuela’s current inflation is predicted to reach 13,000 percent this 2018. The petro was the Venezuelan government’s way to increase its foreign reserves but Trump’s ban is a splash of cold water to Maduro’s dream to “overcome the financial blockade” or more specifically, the sanctions America and the European Union imposed on Venezuela. Bolivar, the South American country’s official currency, is worth 0.00003 to 1 US dollar due to the quadruple-figure inflation the country is currently experiencing.
Americans or anyone within a United States territory is now prohibited from purchasing the petro. Trump authorized Steven Mnuchin, the Treasury Secretary, to issue the regulations required for the order’s implementation. The U.S. president’s EO declared the petro as Maduro’s “attempt to circumvent US sanctions”. He added that any and all related petro transactions are to be considered illegal.
Trump is not alone in his outward opposition of the petro. Venezuela’s own National Assembly has expressed its resistance to the cryptocurrency’s launch, with one South American legislator explicitly and publicly describing on Twitter Maduro’s oil-backed virtual currency as “unconstitutional”. Prior to Trump’s ban, the US Treasury has advised domestic investors last month to not make any petro-related transactions. According to the US Treasury, “the petro digital currency would appear to be an extension of credit to the Venezuelan government..and could therefore expose US persons to legal risk.”
The managing director of Caracas Capital, Russ Dallen, calls the ban as a “big blow” to the petro. He explained cryptocurrency’s value as primarily based on “the greater fool theory” wherein one user would buy a certain digital currency at $100 with the belief that another user would likely buy it for $200. When the country with the world’s largest economy by nominal GDP such as the U.S. is no longer included in the equation, the “interest and potential for that speculation” drastically decreases.