Trump Issues Ban on Venezuelan Cryptocurrency Petro

US President prohibits US residents to deal with Petro hours before ICO launch.

by Marin Marinov
20 March • 4 min
In Coins

US President Donald Trump issued on Monday an executive order banning all transactions by US residents or on US territory related to the upcoming Venezuelan virtual currency Petro (PTR). The move, aimed at preventing Venezuela from bypassing US sanctions through the use of virtual currency, comes hours before the official launch of the Petro initial coin offering (ICO).

Petro is an Ethereum-based token announced by Venezuelan President Nicolas Maduro in December 2017. Many analysts believe that the move is part of Maduro’s efforts to evade US and EU sanctions. Petro’s ICO is scheduled to start on Tuesday.

US President Donald Trump issued on Monday an executive order banning all transactions by US residents or on US territory related to the upcoming Venezuelan virtual currency Petro (PTR). The move, aimed at preventing Venezuela from bypassing US sanctions through the use of virtual currency, comes hours before the official launch of the Petro initial coin offering (ICO).

Petro is an Ethereum-based token announced by Venezuelan President Nicolas Maduro in December 2017. Many analysts believe that the move is part of Maduro’s efforts to evade US and EU sanctions. Petro’s ICO is scheduled to start on Tuesday.

First executive crypto-related order

a capital letter P at the center of a circle
Petro official coin design/ Image`s Source: Venezuelan government.

Trump’s decision is the first ever executive order of a US President on crypto-related assets and activities. It is part of a wider list of US sanctions on the Latin American country after the 2014 government crackdown on protests against high inflation and shortages of basic goods. The Petro executive order states:

“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.”

Executive orders are directives by the US President with the same force and effect as laws. The White House issues them when it wants to bypass the Congress, US legislature, or when there is no time for a full law-making process to take place.

 

Petro

Petro is backed by the oil, gas, gold and diamond reserves of Venezuela. It is a digital currency that uses ERC20 Token on the Ethereum Blockchain. Petro launched pre-sale in February and raised USD 735 million on its first day, according to Venezuela’s President. “IT reaffirms our economic sovereignty,” Maduro tweeted.

“Petro will be an instrument for Venezuela’s economic stability and financial independence, coupled with an ambitious and global vision for the creation of a freer, more balanced and fairer international financial system,” the white paper of Petro states.

The opposition-run National Assembly declared Petro “an illegal and unconstitutional” instrument of Maduro’s government to steal the country`s oil reserves.

President Maduro sitting at the center of a table in front of big Petro advertisement.
Venezuelan President Nicolas Maduro launching official pre-sale of Petro, February 20, 2018/Image`s source: Venezuelan government.

Economic crisis

Many analysts cast doubts on the success of Petro because of the deep economic crisis. Francisco Toro, a Venezuelan journalist thinks that Petro is an act of “desperation”. 

“I do think that part of this is about getting investors from non-traditional lenders, from Russia and China, to put in some more money, to lend fresh cash. The financial sanctions — the U.S. sanctions, the European sanctions — are not the main reason Venezuela can't raise financing. The main reason Venezuela can't raise financing is that macroeconomic finance is a s--- show,” Toro told CNBC in February.

Venezuela faces deep recession with big job losses, low wages, rising food prices and lack of basic goods. Professor Steve Hanke estimates that Venezuela’s annual inflation stood at 4305% in December 2017. There is no official data available. The economic situation is accompanied by a deep political crisis in the Latin American country with presidential election due to be held in May.