Bitcoin as a reserve currency is the dream of many crypto enthusiasts. Venezuela may turn that dream into a reality.
According to a Bloomberg report this week, the country’s petroleum giant PDVSA is urging its central bank to include Bitcoin and Ethereum as foreign reserve currencies in its portfolio. PDVSA wants to use both cryptocurrencies to pay suppliers. The report quotes anonymous sources as saying that Venezuela’s central banks are running internal tests to determine whether they can hold crypto in their reserves.
PDVSA has been hit especially hard by U.S. sanctions that prohibit American entities from engaging in business with it. Oil fueled Venezuela’s economic rise and PDVSA is a key part of the story. In recent times, however, the nationalized oil conglomerate has faced a cash crunch. It barely managed to make principal payments on its bonds earlier this year and has been forced to transact in the Chinese yuan because US entities refused to do business with a sanctioned company.
The Trump administration imposed sanctions against Venezuela to bring down the government of Nicolas Maduro, who is reported to have won last year’s elections through unfair means. To escape the debilitating effect of sanctions on Venezuela’s economy, Maduro’s government launched the Petro – a national cryptocurrency. But it failed to take off.
This latest bid by Venezuelan authorities is another bid to circumvent international sanctions by dealing in cryptocurrencies. Other countries and international organizations are also experimenting with various forms of digital tokens.
To that end, there are several unanswered questions about Venezuela’s venture. The Bloomberg report does not provide details about PDVSA’s crypto holdings or their source. It is also unclear how the oil company plans to handle their price volatility while using them as a payment mechanism for suppliers. Just this past week, Bitcoin price crashed by 9 percent within half an hour. Other coins in cryptocurrency markets followed Bitcoin’s lead.