Want to put Bitcoin and Ethereum into foreign exchange reserves, Venezuela has finally done a reliable thing?

The dream of Venezuela becoming a cryptocurrency country is clearly not limited to the nationally issued petroleum coins.

According to Bloomberg News today, the Venezuelan central bank may soon hold a certain amount of bitcoin and Ethereum as part of its international reserves.

Bitcoin

According to sources who did not want to be named, the Venezuelan National Oil Company (the country’s main source of income), Petroleos de Venezuela, is exploring ways to send Bitcoin and Ethereum to the central bank so that the state-owned company can reach international suppliers. Pay currency debt.

This idea is crazy, can it work?

In fact, unlike the “cryptocurrency” (ie, petroleum coin) created by Venezuelan President Nicolas Maduro, Bitcoin has a certain popularity around the world, and Ethereum is the most important competition currency in the global market. For anyone, it is relatively easy to pay in both cryptocurrencies and immediately convert them into French currency.

More importantly, Venezuela has the cheapest electricity in the world and one of the most powerful hydroelectric generators in Latin America. Therefore, there is reason to believe that despite the flaws in the Venezuelan energy network, the Maduro government could have secretly opened Bitcoin and Ethereum mines in the country.

However, on the other hand, it is not easy to use Bitcoin and Ethereum for international trade. In order to convert these tokens into French currency, anyone who is willing to do business with Venezuela must comply with the KYC policy established by the exchange or over-the-counter trading. In most cases, the KYC policy will be governed by the laws of the United States or other countries affected by US policy.

Considering the further expansion of the sanctions currently facing Venezuela, this will be a problem for the Maduro government.

If Venezuela has Bitcoin, Ethereum or other cryptocurrencies, the government has an obligation to disclose this information to the National Assembly (or National Constituent Assembly), so the public will not see the official response until January 2020. Prior to this, the Maduro government is likely to keep the matter secret to prevent the opposition from taking any possible countermeasures.

Bitcoin is the reserve currency of Venezuela. Is the law going to work?

Bloomberg reported that in addition to using encryption as a means of payment, "the staff is still studying the proposal to include cryptocurrency in international reserves. The current international reserve is $7.9 billion, which is close to the lowest point in 30 years." This means that the country Bitcoin is also being used as a means of value storage.

This is technically and legally feasible due to recent regulatory reforms. Venezuelan legal experts say that the country has been committed to laying the legal foundation for this situation.

Venezuelan lawyer and CriptoJuris Venezuela co-founder Ernesto Portillo said:

“This is entirely possible and has been protected by the law of the Constitutional Act of April 9, 2018. Article 9 of the Act stipulates that the Venezuelan government should promote and accept cryptocurrency as a payment instrument.”

Portillo said that additional measures are needed to list the corresponding agreements in the contracts agreed by both parties. He said that cryptocurrencies currently have the same functions as currencies: value storage, billing units, and payment methods.

However, Bitcoin is a deflation-type cryptocurrency, so it is impossible for the Venezuelan central bank to manipulate the supply of Bitcoin, nor is it possible to arbitrarily set the value of Bitcoin through the law. This is why the Venezuelan government still needs legal tender.

Necessary cryptocurrency innovation

In the past few months, the Maduro government has accelerated a plan to promote the nationwide popularity of encryption technology. Venezuela's mainstream banks can choose the transfer mode of petroleum coins to French currency, and users may connect with other cryptocurrencies in the future.

Incorporating Bitcoin and Ethereum into national reserves may also be a way to promote the popularity of cryptocurrencies in Venezuela. Users can pay to a wallet connected to the bank, from which the recipient can easily convert it to Bolivar, or put the bitcoin in a wallet, just like a savings account.

Without the official statement of the government, we can only guess. We are still not sure whether the Venezuelan government holds Bitcoin and Ethereum. However, depending on the country’s current economic situation and the rapid depreciation of Bolivar, increasing the cryptocurrency reserve will be an upgrade.