President Donald Trump has signed an executive order banning US Citizens from dealing with Petro, the digital currency being fronted by the Venezuelan government. Despite the typo in the original email with the executive order that referred to ‘the situation in America’ rather than ‘the situation in Venezuela’.
The executive order dated March 19 is part of larger efforts to put pressure on the government of President Nicholas Maduro.
“All transactions related to, provision of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018, are prohibited as of the effective date of this order,” the executive order reads.
In February, Maduro launched the Petro in a bid to circumvent crippling economic sanctions on the South American nation. Within a few days, he announced the cryptocurrency had raised $735 million. This claim cannot, however, be independently verified. He would later claim the cryptocurrency had raised $5 billion in the presale.
The presale which started February 20 ended March 20. 100 million Petro were to be released during this period.
The launch of the Petro was a surprise move and the first to be launched by a state. Since then, Cambodia is said to be considering a similar move.
The Petro was due to go on public sale this week. Petro purchases can be done using US dollars and Euros. Venezuelan citizens are themselves technically barred as they are not allowed to purchase foreign currencies.
The move is a clever way to shore foreign reserves but the executive order now puts this objective in peril. CNN reports that Venezuela’s central bank has only $9.4 billion left in its reserves. The country has $150 billion in foreign debt and is currently unable to pay.
The country has been hit by hyperinflation and the local currency rendered almost worthless. Long bank queues are now part of everyday life.
A drop in oil prices and mismanagement plunged the country into the current economic crisis. The Petro, according to its whitepaper will be backed by the country’s oil reserves, the largest in the world. Critics has however said the move is illegal as it amounts to issuing debt.
The order also gives the Treasury Secretary powers to institute necessary regulations to effect it.
Treasury Secretary Steve Mnuchin has himself criticized the launch of the cryptocurrency and warned people against participating in it. His department characterised the move as an “attempt to prop the Maduro regime.”
US Senators like Marco Rubio had also voiced their strong criticism of the move and at one point writing to the Treasury Department to give details and how it was going to protect American investors.
The executive order forms part of wider sanctions going back to the Obama era. The Trump administration has also barred American citizens from buying Venezuelan bonds including those of PDVSA, a state-run oil company.
In 2015, President Obama imposed sanctions citing human rights violations, diminishing press freedoms, persecution of political opponents among others.
Venezuelan elections are coming up in May but many opposition leaders have largely abstained.