As reported by Venezuelan news network Telesur, the Reserve Bank of India, its central bank, has issued a ban on the use of cryptocurrencies. As Indian Foreign Minister Sushma Swaraj announced at a news conference on May 28:
“We cannot have any trade in cryptocurrency as it is banned by the Reserve Bank of India. We will see which medium we can use for trade.”
The cryptocurrency ban by the Indian central bank was made clear by a circular dated April 6, titled “Prohibition on Dealing in Virtual Currencies (VCs),” which stated the following:
“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs.”
Nevertheless, as previously reported by blokt, the Supreme Court of India will be holding a hearing on July 20 to discuss the central bank’s decision.
Venezuela Offers India Discount on Crude Oil Purchases
Local Indian news outlet Business Standard reported in late April that the Venezuelan government has offered India a 30% discount on crude oil purchases if made using its petro cryptocurrency.
Oil imports from Venezuela are at their lowest levels in over five years as oil production in the beleaguered Latin American nation falls. This is not a big problem for India, which made up for the shortfall by importing from OPEC nations, in particular, Iraq and Saudi Arabia.
Maduro Government May Need the Petro to Stay in Power
The launch of the Maduro government-backed cryptocurrency is intended to circumvent US sanctions against Venezuela, which were recently increased following Maduro’s controversial re-election. The US has already issued a ban on petro.
And while India has stated that it would continue to trade with Venezuela despite unilateral US sanctions, the Maduro government remains under significant pressure. Its inflation rate recently breached 25,000%, rendering its official currency, the bolivar, essentially worthless.
As a result, destitute Venezuelan citizens have been turning to cryptocurrencies. While the government initially cracked down on the practice, it eventually saw cryptocurrencies as a potential solution for itself. The Maduro government has already announced that it plans to make the petro the official Venezuelan currency by 2020.
Maduro has claimed that petro, which is backed by the country’s massive oil reserves, has already raised $5 billion from over 186,000 certified purchases. However, given the low credibility of the government, there is a high amount of skepticism as to whether the government will be able to deliver on its petro network and whether it has any actual long-term value. Despite its pivot toward blockchain, the condition of the ailing nation is not expected to improve anytime soon.