The Cuba/Russia-backed Venezuela regime of Nicolas Maduro claims it is going to create a virtual currency to get around U.S. and E.U. economic sanctions. During his weekly Saturday evening television specials, that according to Reuters ran for five hours, Maduro said that “CriptoMoneda” is coming soon:
Presidente Nicolás Maduro anunció la creación de “El Petro”, una criptomoneda, la cual estará respaldada por las reservas de petróleo del país. Como parte del proceso de incorporación a las nuevas tecnologías del siglo XXI y las nuevas formas de financiamientos pic.twitter.com/bGbSYIE6l9
— teleSUR TV (@teleSURtv) December 4, 2017
According to Maduro, he has ordered the creation of the Venezuela BlockChain Observatory to help study and launch CriptoMoneda.
If you would like to familiarize yourself with terms such as virtual currency, cryptocurrency, Bitcoin, Blockchain, and the other vocabulary of these new transactional devices, there are various excellent sources. The Digital Chamber of Commerce website is a good starting point for general background information as well as more specific regulatory guidance and links to other organizations who populate this space.
If the reports are correct that Venezuela’s economy is in a near collapse, this may no more than another one of Maduro’s harebrained schemes to distract Venezuelans. Unlike other sanctions evading tools, this proposal could generate more than buzz in the markets.
To my knowledge, it is the first time that a Latin American nation has floated the idea of launching a virtual currency. I doubt that white hat proponents of virtual currency or blockchain transactions are jumping for joy. The last thing they need is Cuba-backed Venezuela serving as poster boy for crypto.
Is Venezuela serious about CriptoMoneda? Do they have the technological know-how to make this work? Are they working alone or do they have other nations such as China or Russia lending a hand? Any non-state actors assisting them?
My early favorite for facilitating nation-state in chief would be Russia. In addition to its traditional regional adventurism in the Americas to undermine U.S. influence in places such as Cuba, Venezuela, Nicaragua, Mexico and elsewhere, Russia announced in October the creation of the CryptoRuble.
What better place to test the CryptoRuble than in oil-producing Venezuela or Communist Cuba? Iran comes to mind, so does North Korea. While U.S. Russia sanctions are anemic, they are an increasing nuisance that the technologically savvy Russians are capable of undermining in many ways, including with the creation of a virtual currency system of its own.
With regards to virtual currency as a sanctions-evading tool, there have been mainstream media reports that several countries are allegedly using virtual currency and blockchain technologies to evade sanctions. The countries on that list include Ukraine, North Korea, and Iran. With Maduro’s announcement this weekend, add Venezuela to that list.
I’ve also discussed these issues with policy experts in these matters who claim that terrorist groups such as ISIS, Al-Qaeda, Hizbollah are among the entities that are using, or trying to use, virtual currencies and blockchain technologies to hide transactions. It will be interesting to see where this Venezuela project results in anything tangible or if it is, likely, more hot air from a dying government.
If Maduro is seriously pressing forward with CriptoMoneda, it offers a whole set of potential targets for economic sanctions including, but not limited to, internet service providers, hardware and software manufacturers, and international organizations involved in policing the Internet. The Trump administration and the Congress should look into the matter. Promptly.