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Venezuelan President Nicolás Maduro has announced that Petro (PTR) will become an official unit of currency. Wages and prices will be anchored to national cryptocurrency, which is backed by oil. As of August 20, Venezuela will have two official government currencies: PTR, the oil-backed cryptocurrency, and the new Bolivar (VEF) called ‘Sovereign’ (BsS).

Currency Reconversion

Venezuela is going through a process of monetary reconversion this weekend. From August 17 to 20, the entire banking system is working at mid-machine as their platforms are upgraded. The new Bolivars (BsS) will be a reissue of the old one and five zeros of the current Bolívar Fuerte (BsF) will be removed.

The new measures are designed to try to curb hyperinflation, reduce the high demand and scarcity of cash that citizens suffer. The International Monetary Fund (IMF) projects Venezuela’s hyperinflation rate to exceed 1,000,000,000 by the end of the year, with an estimated 18% reduction in GDP.

These changes will take effect on Monday, August 20, declared by the president as a non-working day to allow for the transition to the new national currency.

New Crypto Salary Base

In several televised speeches this week, President Nicolás Maduro announced new economic changes for the country. For the first time in history, the minimum wage is anchored to cryptocurrency.

As far as we know, the state-owned oil company Petróleos de Venezuela (PDVSA) will use digital assets to issue salaries. PTR was first proposed by the government in December 2017, in the midst of the crypto market bullish. It was officially launched in February of this year with all coins pre-mined by the Venezuelan government.

Petro is said to be built on the blockchain NEM:

Although Petro is commonly referred to as a cryptocurrency, that claim is disputed because of state controls. Weiss Ratings, a financial advisory company that monitors, analyzes and qualifies cryptocurrencies, calls this currency a ‘fiduciary currency’.

Venezuela will now have a new wage and price system linked to the PTR. Maduro said the change “will mean a substantial improvement in workers” incomes.

In the most recent announcement made by the president on Friday night, the 17 of August, it was officially declared that the minimum wage will now be 1,800 BsS (equivalent to 180,000,000 BsF), similar to 30 US dollars.

I have decided to implement a new minimum wage based and anchored in the Petro, that’s why I have set the minimum wage for all the BsS 1800 or 0.50 PTR salary tables, the basis for the salary update, ‘petroleumizing’ the salary,” said Maduro.

The president also assured that each Petro will have a value of 3,600 BsS, the equivalent of 60 US dollars, the current price of a barrel of Venezuelan oil. Maduro acknowledged on Friday that the country is ‘dollarized’: “the ‘economic war’ has lowered the salary from 300 dollars to 1 dollar”. He indicated that he will assume the differential of the payroll payment of small and medium enterprises for a period of 90 days. “I assume, I have the money to do it,” Maduro said.

It also announced a conversion bond of 600 BsS (60,000,000 BsF), equivalent to 10 US dollars, for 10 million beneficiaries.

Petro (PTR) is still a controversial point. An article by the Brookings Institution argued that PTR could not stabilize the Venezuelan economy. Some Venezuelans believe that the creation of the currency was illegal, and the media has repeatedly reported that Maduro has never provided any evidence that the sale of cryptocurrency has generated the income he claims to have.

President Donald Trump, on the other hand, prohibited Americans from investing in PTR, saying it was designed to obfuscate US sanctions and access international financing.

Venezuela Studies The Creation Of A Cryptocurrency Central Bank

The draft amendments to the Constitution will be submitted to the board of the Asamblea Nacional Constituyente (ANC) for consideration within 30 days. The ANC is, therefore, drafting constitutional amendments aimed at creating a central bank for cryptocurrencies.

According to a Reuters report, in addition to the creation of a cryptocurrency central bank, the amendments provide for a separate court that will be above the Supreme Court. The details about this have not yet been revealed.

The new institution will have “exchange rate, monetary and financial policy functions,” said Hermann Escarrá, one of the most influential members of the ANC.

The amendments will also include everything about the new economic reforms underpinning cryptocurrency.

Allegedly, the draft changes to the constitution will also provide access to foreign investment for local companies, particularly oil companies.