Deal of the Day: Venezuela’s New Cryptocurrency

Venezuela


By Bill Taylor/ Fintek Capital

With a swift wave of the hand and a ‘yes’ vote in parliament, Venezuela just solved its economic problems AND created a wonderful opportunity for investors. Bet you are excited now, right? Well if you are, and you are thinking about taking a look at an opportunity in Venezuela……… please call me first. I have a deal for you. So what is this super hot deal in Venezuela? A cryptocurrency.

Seems Venezuela’s President Nicolas Maduro got his hands on a financial engineering textbook and came up with a plan……….not a good plan, but a plan. Here’s the deal. Back in February Maduro announced a cryptocurrency backed by Venezuela’s oil reserves (a “petro” crypto) that would secure cash in an economic meltdown and also get around sanctions put on by the US. Now Maduro has announced a new currency (to replace the old worthless one) that will be backed by the aforementioned “petro” cryptocurrency. Follow this? OK, lets’ simplify.

  • Venezuela did an ICO for a digital currency backed by its oil reserves (“petro” crypto)
  • The petro token has not been issued yet (so it doesn’t trade obviously) but “is” backed by a barrel of oil from the state’s national petroleum reserves
  • A new fiat currency is issued backed by the not yet issued, or traded, petro tokens
  • A “reverse split” of the old currency takes place (you turn in 100,000 bolivars and get 1 (one) new fiat called the “sovereign bolivar”
  • Bingo! A new fiat currency and a single floating exchange rate in the future tied to the “petro” digital currency

What could possibly go wrong? Well, for starters, it may all be illegal…….even in Venezuela. Seems many in the parliament say it IS illegal. But hey, a good dictator gets the last vote. Also, the illiquid digital currency can’t be traded outside Venezuela (if at all) and good luck getting the barrel of oil it is backed by through airport security.

So, this is either (a) brilliant, OR (b) a total scam. Hmmmmm! Probably all those Venezuelans leaving the country are just going to neighboring countries to buy vacation homes with the new “sovereign bolivar.”


Bill Taylor is Managing Partner at Fintek Capital & a frequent contributor to FintekNews