On Monday the White House issued a new executive order banning all types of dealings associated with Venezuela’s new crypto-currency the Petro. The order says, “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 9 January 2018, are prohibited as of the effective date of this order.”
After the announcement of Trump’s ban of Petro, the Time magazine reported that the Currency was a joint venture between Russia and Venezuela in order to “erode the power of U.S. sanctions.” Time did not mention their source of the news in the report.
However, the Russian news agency Sputnik reports that on Tuesday the initial coin offering (ICO) started despite Trump’s ban. It is yet to be seen what impact the ban would have on the initial offering.
Meanwhile the Venezuelan government called the US ban as a “crime against humanity” which should be tried at the International Criminal Court. Any effect of the ban would be strongly felt by the country where the inflation will soar to 13,000 Percent in 2018 according to Bloomberg. BBC reports that Venezuela has an estimated total debt of around 140 billion dollars.
The Petro cryptocurrency was launched on the 20th of February by the Venezuelan President Nicolás Maduro who later revealed that the pre-sale raised 735 million dollars on the first day. The huge figure was seen by some observers as an effort to build confidence in potential investors as the Venezuelan economy is on the brink of hyperinflation. The USA saw the launch of the Petro as an effort to circumvent the US sanctions. As the two countries are political rivals, a forecast on the future of the currency was hard to make at the time. Although, unlike the other cryptocurrencies in the market, the Petro had the backing of Venezuela’s oil reserves. President Maduro revealed that he plans to issue 100 million tokens valued at one barrel of oil each, raising a total of 6 billion dollars.
With this ban the question has come up again. And this time more seriously than ever. How far can crypto currencies be a risk for an investor?
In November 2017 the Bitcoin price reached its all-time high at $17,900 despite the warnings of several business magnates such as Warren Buffet who compared the rise of Bitcoin to a mirage. Jamie Dimon, Chief executive of JPMorgan Chase called Bitcoin a fraud. But the currency is still in demand and still maintains a value of around $6000. Many countries including 2 of the largest economies in the world China and India tried to curb cryptocurrencies but it has thrived in those countries despite all those efforts.
It is also important to mention that the US government has never banned any crypto currency before. Therefore, it is clear that the ban comes with some political reasons behind it beyond the currency’s volatility. At its inception itself the domestic political opponents of President Maduro called the cryptocurrency illegal and unconstitutional and warned investors against buying it. In other words, it is clear that the future of cryptocurrency is not at risk as long as it does not involve politics.