Venezuela will phase out the petro today, the country’s official cryptocurrency.
President Nicolas Maduro launched the oil-backed cryptocurrency in 2018 due to inflation and the US embargo on Venezuelan oil. Despite a brief period of early success, a corruption scandal and failures in the currency’s blockchain weakened the currency. After today, all remaining Bitcoins will be converted to Venezuelan Bolivars.
Last year, Venezuela saw an inflation rate of 189%, a slight improvement from 234% the previous year. The Venezuelan Financial Observatory attributed this change to the lower rate of devaluation of the bolivar and the policy of reducing salaries. In addition, the months of October, November and December saw the lowest inflation rates in months in the Latin American country.
Getting rid of the cumbersome cryptocurrency will likely inspire greater confidence in the Venezuelan bolivar as citizens return to it, as the currency is used more than the petro anyway. In addition, the gradual decline in inflation is expected to continue unimpeded towards the end of Petro’s term, which did not succeed in curbing inflation and circumventing US sanctions. Maduro’s decision to ditch the petro may encourage regional neighbors like El Salvador to follow suit in favor of simpler, more traditional currencies that citizens are more likely to trust.