Nicolas Maduro, president of Venezuela, stated the country could offer cryptocurrency-based loans to the agricultural sector, in addition to the traditional loans in several fiat currencies. He also stated that Venezuela has worked with petro and other cryptocurrencies for three years, pioneering the use of this kind of asset in Latam.
Government Hints at Offering Cryptocurrency Loans in Venezuela
Maduro hinted at the possibility of giving loans in cryptocurrency to the agricultural industry in an announcement made in a cabinet meeting last Thursday. He stated the country would look for new ways to finance domestic agriculture and also stated these loans would feature low interest rates to benefit farmers. Elaborating to his ministers, Maduro noted:
I ask you personally to lead the public banking sector and summon the private banks to multiply loans and financing under the mildest conditions for all food producers in the country.
The proposal also introduces the idea of giving these loans in several fiat currencies, such as euros and even the Chinese yuan. While Maduro mentioned Venezuela’s own cryptocurrency, the petro, he also stated that they will work with all cryptocurrencies, as the government has been doing for three years now.
An Escape From the Bolivar
Maduro’s shift to cryptocurrency signals a deficiency in the strength of Venezuela’s own fiat currency, the bolivar, which has been quickly losing ground against the dollar, which has become the de facto currency in the country. Just recently, on June 20th, the bolivar lost more than 10%, and now that loss is closer to 20%, according to popular dollar price indexes.
This is why the government is considering redenomination of its currency, slashing six zeroes from the current figure. This would facilitate the task of calculating taxes and making large payments, which with today’s exchange rate result in very big numbers difficult to work with.
This is not the first time the Venezuelan government has turned to cryptocurrency to try to improve its economic standing. Venezuela was one of the first countries in Latam to develop a sizable Bitcoin mining community even before the activity was regulated. Also, Venezuela was a pioneer in cryptocurrency adoption, with the launch of one of the first state-sponsored cryptocurrencies, the petro. Maduro stressed this idea in an interview given to Bloomberg on June 22 amidst the big reaction El Salvador elicited when it made bitcoin legal tender.
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