Oil in Global Economy Series: Venezuelan Congress declares Maduro’s cryptocurrency plan illegal

Venezuelan Congress poured cold water on President Maduro’s plan to issue $5.9 billion worth of cryptocurrencies to tackle the country’s debt that will be backed by Venezuela’s oil. Venezuela’s opposition-run parliament on Tuesday outlawed the move by Maduro calling it an effort to illegally mortgage the cash-strapped country’s oil reserves. The move from parliament came after announced his plans to use cryptocurrency to finance the country’s debt and bypass the sanctions imposed by Washington.

Since Maduro has routinely ignored the legislature after his party lost control of Congress in 2016, and the pro-government Supreme Court has shot down nearly every measure passed since then, he might still move ahead with the plan. However, a threat by legislators by calling the move illegal is sure to reduce demand for it. Legislators warned investors that the petro-currency would be seen as null and void once Maduro, who is up for re-election this year, is no longer in office. They added that the petro-based crypto issue violates constitutional requirements that the legislature approves borrowing.

The Venezuelan economy is undergoing a severe crisis which reflects by the fact that the country with the highest oil reserve in the world is suffering acute gasoline shortage. The latest survey by Platts’ suggest that the crisis has started taking its toll on oil production, which dwindled to 1.7 million barrels per day, a 0.6 million barrels decline over the past two years.