Venezuela has been in crisis for several years but it culminated this past Spring when President Munro and Venezeula’s Supreme Court took away power from its Legislature. Its economy is in the toilet, its people are starving, and even China is losing patience as Sinopec filed suit in a U.S. court against Venezuela’s state-owned oil company PDVSA for unpaid debts.
One proposed solution that Munro has announced is the creation of a national cryptocurrency called the Petro to replace the Bolivar. The cryptocurrency would be asset-based, meaning tied to Venezuela’s mineral riches including gold, nickel, iron ore, steel, diamond, alumina, coal, bauxite, asphalt, natural gas, and petroleum.
Here’s a Google Translation of the official announcement:
During the transmission of his program Sundays with Maduro, the Venezuelan president explained that this mechanism is backed by the natural riches of the nation such as gold, oil and gas. He also indicated that this new system will work on the promotion of oil reserves. “Venezuela will create a petromoneda cryptocurrency to advance monetary sovereignty, as it will help to overcome the financial blockade and thus move towards new forms of international financing for the economic and social development of the country.” Likewise, it announced the creation of the Blockchain Observatory in Venezuela, as an institutional, political and legal basis for the launch of the Venezuelan cryptocurrency. This body will be formed by a multidisciplinary team composed of 50 people, specialists in the areas of economy, legal, monetary and will be attached to the Ministry of Popular Power for University Education, Science and Technology.
This announcement has mostly been met with skepticism if not outright derision such as this recent article by Reuters “Maduro’s cryptocurrency to fare no better than Venezuela itself: analysts,” however there are two important considerations missing from any analysis I’ve read so far of Munro’s proposal.
Other Governments Are Testing The Same Thing
Japan has recently announced the creation of a national cryptocurrency called J-Coin.
A consortium of banks, led by Mizuho Financial Group and Japan Post Bank, has garnered the blessings of the country’s central bank and financial regulator to launch J-Coin, an electronic currency used to purchase goods and transfer money using smartphones.
Singapore is in the midst of trials for the establishment of its own cryptocurrency, and Estonia has announced plans to create the ESTcoin. China, which banned ICOs for a period has now announced that the ban is only temporary “until local financial regulators introduce necessary regulatory frameworks and policies for both ICO investors and projects.”
The Technology Is Vulnerable To Exploitation or Subversion
The programming languages used in creating cryptocurrencies and their distributed ledgers including Bitcoin and Ethereum can be manipulated through a variety of technical and non-technical “hacks” resulting in potentially dire consequences. There were three successful attacks in July 2017 alone, but here’s a history of high profile attacks going back to August 2010. There are known problems with Solidity, the programming language most often used in creating hundreds of ERC20 tokens on the Ethereum blockchain, as described in this paper “A Survey of Attacks on Ethereum Smart Contracts SoK.”
What Happens When Bitcoin Becomes A Sovereign Proxy?
The news about Venezuela prompted me to approach Dr. Kathleen Kiernan whose company runs exercises for her IC and DOD customers on a variety of complex scenarios called Crafty Bastards workshops. On March 9th, Dr. Kiernan and I are hosting the Breaking the Blockchain Summit and Workshop which will feature a slate of experts who will address security vulnerabilities in the blockchain and cryptocurrencies during the afternoon. Then in the evening, attendees and subject matter experts will participate in a scenario involving how State and non-State actors could exploit, manipulate, or sabotage another nation’s cryptocurrency using those weaknesses. Information on our speakers, topics, and how to register can be found at the event website.