The Venezuelan government has reportedly put an end to its official cryptocurrency, the Petro.

But what was the Petro? And why did it fail to solve the country's 359.99% inflation rate in 2023?

The Petro: A Failed Experiment

Venezuela may have become the first country to launch and abolish its own cryptocurrency. According to all accounts, the official website, which is still accessible, does not allow the purchase of the Petro anymore. The site displays an "Under Maintenance" message when trying to register.

The Petro was launched in 2018 as a means of evading U.S. sanctions. It achieved full functionality in 2020 but did not enjoy widespread adoption in Venezuela or abroad. It was not for lack of trying either.

The Venezuelan government attempted to use it as a unit of account internally, ordering it to be used for social housing initiatives and pegging 50% of the minimum wage to the Petro. 

The currency was even backed by the country's lush oil reserves, a favorite talking point among proponents of a BRICS currency, who advocate for commodities back fiat currencies.

So, why did it fail?

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Cryptocurrencies Can't Cure Corruption

Just months before a pivotal presidential election in Venezuela, the government's decision to eliminate the cryptocurrency is akin to acknowledging failure. But the Petro will surely not be missed in a country plagued by consistent hyperinflation. 

The estimated 359.99% inflation rate in 2023 is already a vast improvement from the shockingly high numbers the years before. But the Petro could not — and did not — fix the country's many structural problems, such as corruption. According to Transparency International's 2022 Corruption Perceptions Index, Venezuela scored a lowly 14/100, with 0 being "highly corrupt." The country ranked 177th out of 180 countries.

What's Next For Venezuela

Venezuela and the U.S. have been in talks over sanctions relief to ease the burden on the quasi-dysfunctional Venezuelan economy. An agreement could be the first step to unlock Venezuela's oil reserves — the largest in the world.

The country may want to look toward El Salvador as a role model for cleaning up its act. The Central American country is regularly making the headlines with positive news: be it the approval of its "Volcanic Bonds" or its Bitcoin-tied "Freedom Visa."

Bitcoin adoption is definitely not a panacea. But neither is a half-baked attempt at a Central Bank Digital Currency.

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