Senate bill could make this crypto illegal in the United States

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Senate bill could make this crypto illegal in the United States

A U.S. Senate bill banning citizens from buying, holding, or trading the Venezuelan Petro cryptocurrency could become law as early this week.

If approved by the Senate, President Trump is expected to sign Senate bill 1025 once it reaches his desk.

The President’s signature would make Petro the first cryptocurrency banned in the United States. Critics believe the bill may set a dangerous precedent for future cryptocurrency bans. 

According to the bill’s text,  the chairmen of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) would also be tasked with developing a methodology for assessing how the Petro is circumventing sanctions:

“Not later than 180 days after the date of the enactment of this Act, the Secretary of State and the Secretary of the Treasury, after consultation with the Chairman of the Securities and Exchange Commission and the Chairman of the Commodity Futures Trading Commission, shall develop a methodology to assess how any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Maduro regime is being utilized to circumvent or undermine United States sanctions.”

It remains unclear what such methodologies would entail and whether or not it could involve a form of tracking.

A brief timeline of the Petro

A brief timeline of the Petro

In December 2017, Venezuela’s president, Nicolas Maduro announced that he was launching a state-issued cryptocurrency, called the Petro, that would be backed by national oil reserves.

Below is a brief timeline of events in the development, launch, and adoption of the Petro:

2018

Feb:   Petro Launched, with the claim of pre-sale raising US$3.3 billion

Mar:   US citizens prohibited from conducting Petro transactions

Aug:   Venezuela introduces the Sovereign Bolivar, ties its value to Petro cryptocurrency

Oct:   Petro token sale goes live.

Oct:   Ethereum developer accuses Petro of being a Dash clone

2019

Mar:  US Treasury Dept sanctions Russian bank for financing Petro

Jul:  President Maduro orders countries top bank to accept Petro at its local bank branches

Strong-arming acceptance

Since Petro’s launch last year, Madura has employed several strong-arm tactics to force its acceptance.

At first, he attempted to tie the Petro to the country’s fiat currency, the bolivar. As this bolivar proved too hyperinflationary, the Petro’s value was then supposedly tied to oil reserves, gold, and diamonds.

However, Maduro has taken a more piecemeal, albeit determined, approach since then.

Last October, he required Venezuelans to purchase passports using the Petro.

Two months later, Maduro began to convert pensioners’ monthly payments into the Petro.

And this past July, he ordered the country’s leading bank, the Banco de Venezuela, to accept the Petro.

Maduro claims to have raised several hundred million dollars since the Petro first launched

National cryptocurrency developments

In a bid to evade U.S. sanctions, authoritarian regimes are flirting with creating national cryptocurrencies.

For instance, Cuba’s government has begun viewing cryptocurrency as a way to raise income and boost its economy.

Speaking on state-run television, Cuban Minister of Economy and Planning Gil Fernandez stated that he has “decided to study the potential use of cryptocurrency in national and international commercial relations.”

Likewise, Iran is creating a national cryptocurrency backed by gold. The move comes after a year of tough U.S. economic sanctions on the country.

To facilitate this move, the Iranian government decided to legalize cryptocurrencies and crypto mining this past summer. 

Russia is also developing its own state-issued crypto, called the CryptoRuble. Although the cryptocurrency is still in development, it’s expected to operate much the same way as a normal ruble.

Despite moves to make trading Petro a crime, more nation-based cryptocurrencies are on their way.

Their success as a tool to evade U.S. sanctions will invariably determine their future development.