Venezuelan National Assembly declares Petro illegal

Venezuelan internal politics leaves the future of the oil-backed Petro (PTR) in flux. 

Having raised something like $700m during the recent pre-sale phase for its proposed Petro (PTR) cryptocurrency, there have recently been two apparently contradictory bits of news that cloud the future of the cryptocurrency. So, could President Nicolas Maduro’s innovative attempts to bypass US and EU sanctions and bring foreign investment into the struggling South American state be on the rocks?

On one side of the story, was a Reuters report announcing the oil-backed cryptocurrency would soon be auctioned off to private companies using the Diacom foreign exchange platform. Not long after, however, Venezuela’s National Assembly (AN) declared the issue of the Petro to be illegal.

Specifically, after being translated by Google, its statement read:

“On Tuesday, the National Assembly declared null the issue of the Petro (PTR) and all the obligations emanating from its circulation, considering it a violation of the Magna Carta and the laws.

“After the debate on the implementation of the PTR by the president of the Permanent Finance Committee, deputy Rafael Guzmán (Unity/Miranda), the AN in full decided to approve an agreement in rejection of the financial mechanism and alert for potential investors and actors of the cryptocurrency market, considering the issuance unconstitutional and any other obligation on the part of the Venezuelan State that has as guarantees the oil reserves or any other mineral.”

The internal politics of Venezuela is, to say the least, fractious at the moment. The truth is that, due to political manoeuvring, the AN – which is controlled by opponents of President Maduro’s ruling United Socialist Party – is currently a relatively toothless talking shop.

That is largely due to the decision by Maduro to implement a new lawmaking legislature, the Constituent Assembly, made up of his own supporters to supplant it. That was a move criticised as undemocratic and unconstitutional both in Venezuela and abroad.

The opposition critics within the AN see the Petro as an “a strategy to generate treasury resources to keep stealing money from Venezuelans” following sanctions and several massive devaluations of the country’s currency – formerly the Bolivar and now the Bolivar Fuerte. It also warned investors against buying Petro, as it considers any financial mechanism that potentially makes claims to the country’s mineral reserves as inherently illegal under Venezuela’s laws.

Whether this will actually stop the United Socialist’s plan is unclear. It is, at least at the moment, unlikely to halt the Petro. Though such intervention cannot be helpful in generating the kind of interest the Venezuelan treasury were hoping for.

That does not, however, mean that the idea will not be adopted by other similarly sanction and embargo his countries in time.