2/25/2018 Why Venezuela Should Worry About a National Crypto - CoinDesk

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Why Venezuela Should Worry About a National Crypto

Michael del Castillo   

FEATURE
 Feb 23, 2018 at 09:00 UTC  |  Updated  Feb 25, 2018 at 10:26 UTC

While not many things are clear about Venezuela's new state-backed cryptocurrency, the petro, what is apparent is that many think it's potentially harmful for the
country's people.

Hard and fast details have been sparse about the crypto token launched by Venezuelan President Nicolas Maduro on Feb. 20. But, from its inception, the
cryptocurrency was touted by the leader as a way to bypass financial sanctions (last month alone, the U.S. Treasury Department sanctioned four Venezuelan
generals for corruption).

Amid those concerns about the oil-backed crypto, which supposedly raised $735 million on the first day of its pre-sale, many former and current government
officials are uneasy about the thought of a potential Orwellian disaster that it might bring, too.

"Cryptocurrencies combine convenience and freedom of cash with the potential of total control of all operations," according to Artem Duvanov, the director of
Moscow Exchange Group's National Settlement Depository, which is experimenting with blockchain for a number of use cases.

"If the government wants to introduce some control on operations done via crypto on its territory, it does make a lot of sense to issue its own cryptocurrency,"
he said.

These fears of a crypto-powered Big Brother are notable, since the original cryptocurrency, bitcoin, was heralded as a way for anyone to anonymously transact
and sidestep government scrutiny.

But as the industry has matured, some blockchains - the permanent records of transactions that cryptocurrencies are built on - have started to conflict with that
notion.

And what's so concerning to some about the petro's blockchain is that it's been instigated by one man, Maduro, and his party, who have a long history of
corruption and human rights abuses, as well as a track record of stoking hyperinflation.

Yaya Fanusie, the director of analysis at the Center of Sanctions and Illicit Finance within Washington, D.C.-based think tank, the Foundation for the Defense of
Democracy (FDD), told CoinDesk that cryptocurrency in the hands of Maduro's regime should be worrisome.

"With the Maduro regime's record of corruption and abuses, this is something to be really concerned about," he said.

Fanusie, who is a former CIA analyst, went on:

"Assuming people really do use the petro for daily transactions, it would give the government an acute awareness of citizens' personal finances."

Double-edged sword

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2/25/2018 Why Venezuela Should Worry About a National Crypto - CoinDesk
The FDD is so concerned about the potential nefarious uses of cryptocurrency by nation states that a new joint research project has been launched within
Fanusie's department to better understand how Maduro's petro could undermine democracy.

The new project, which is being conducted in partnership with the FDD's Latin America project and the Cyber-Enabled Economic Warfare project, is starting its
work by using the same transparency that threatens Venezuelans.

While it's still unclear exactly which blockchain the petro is being built on top of - the petro's white paper states ethereum, but the buyer's manual claims NEM -
both of those cryptocurrencies have public ledgers that FDD researchers can watch.

Specifically, the project will employ a combination of open-source blockchain explorers, data analysis tools and custom built tools to look for what Fanusie calls
"aggregate" patterns in the flow of data.

"What we're setting up is a way for when those coins start moving to see how many petro coins are being used," said Fanusie.

And with this research, Michaela Frai, a research associate for the Latin America project, who is now helping manage the petro-focused project, hopes the
groups can glean insightful data that can be used to fight corruption in Venezuela.

She told CoinDesk:

"My concern is that the petrol is going to continue to perpetuate this fake democracy, and only support the authoritarian dictatorship, and Big Brother the
people around the country."

Skipping sanctions
On the other hand, some actors are very keen on the prospect that Venezuela will be successful in circumventing sanctions with the petro.

Just a few blocks from the DFF, another think tank, the Center for a New American Security (CNAS), is paying close attention to Venezuela in that regard.

"We are engaged in active research projects on these topics," said Edoardo Saravalle, a researcher for the CNAS Energy, Economics and Security Program, who
co-authored a report last year on the use of bitcoin by terrorists.

Saravalle explained that his organization has been soliciting the knowledge of cryptocurrency experts and those in the know about how the technology could
be used for nefarious activity.

While still in the earliest stages of that work, there's already a number of concerns he's identified. For instance, even if Venezuela's efforts to avoid sanctions
end up failing, he believes other countries are watching, in an effort to learn how to adapt the model to succeed.

Already, a number of nations who have recently been issued sanctions have begun to explore state-backed cryptocurrencies. As recently as yesterday, a senior
member of the Iranian government floated the same idea, following the People's Bank of China and the Russian deputy prime minister announcing similar
endeavours.

Saravalle told CoinDesk:

"If it doesn't work in Venezuela, someone in another country might make it work, and that is very disconcerting. It creates an incentive for countries to look
around at cryptocurrencies in case they are ever sanctioned."

Protest in Venezuela image via Shutterstock

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Chesley Ruff • 3 days ago − ⚑

Chile, Honduras, Guatemala, El Salvador, Panama, Cuba, Nicaragua, Korea, Vietnam, Iran, Libya, Iraq, Afghanistan, Syria and today's flavor
Venezuela. Oh, the CIA is concerned about people's privacy.
3△ ▽ • Reply • Share ›

Djo R'dji > Chesley Ruff • 2 days ago − ⚑

hahaha =)
△ ▽ • Reply • Share ›

Darren Brown • 2 days ago − ⚑

This article is trash. Stop attacking Venezuela for embracing cryptocurrencies.
2△ ▽ • Reply • Share ›

biden_jose > Darren Brown • 2 days ago − ⚑

The Petro isn't a cryptocurrency. It's a debt instrument issued by the Venezuelan government in a scheme to receive hard foreign
currency. It's not even really backed by oil--it's backed by a promise to repay.
3△ ▽ • Reply • Share ›

Black Sheep > Darren Brown • 2 days ago − ⚑

Learn something about a topic before making a blanket comment. Venezuela is not embracing cryptocurrency. Cryptocurrencies are
illegal in Venezuela. They are creating their own crypto for complete control. You obviously don't understand the dangers of a nation
state cryptocurrency. Look up the Fedcoin by Doug Casey and learn the inherent dangers duude.
1△ ▽ • Reply • Share ›

menacetohighsociety > Black Sheep • a day ago − ⚑

Cryptocurrency may be illegal, but it isn't enforceable. What's your source that claims that crypto, other than Petro, is illegal?
△ ▽ • Reply • Share ›

Djo R'dji > Darren Brown • 2 days ago − ⚑

totally!
△ ▽ • Reply • Share ›

Anonymouse • 2 days ago − ⚑

This article should be and embarrassment to its publisher
1△ ▽ • Reply • Share ›

Marcello • 3 days ago − ⚑

Off course "It creates an incentive for countries to look around at cryptocurrencies in case they are ever sanctioned." I don't understand why
Russia does not start to use Bitcoin in large scale, even to fight against usd dominance. So it is not a problem of citizens from Venezuela as
cryptos are legally now in Venezuela they can use other cripto currencies instead than Petro, where is the problem? Is it a problem for
Venezuela citizens or for USA government? It is not the same...
1△ ▽ • Reply • Share ›

ennio > Marcello • 2 days ago − ⚑

That's not true at all, don't talk about a subject you know nothing about. I live in Venezuela and cryptos are not "legal" if the
government finds someone mining any cryptocurrency they steal the miners from them claiming that mining is illegal and then they
use the miners themselves. The only reason they are launching the Petro is to get more money than they already stole since 1999
while the people keeps starving to death.
6△ ▽ • Reply • Share › Show 1 new reply

berniegoetz > ennio • 2 days ago − ⚑

The money raised will be quickly swallowed by corruption and the speculators will be left holding the bag.
△ ▽ • Reply • Share ›

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2/25/2018 Why Venezuela Should Worry About a National Crypto - CoinDesk

Chesley Ruff > ennio • 2 days ago − ⚑

Then "the people" need to change the Government.
△ ▽ • Reply • Share ›

Reyna Borjas > Chesley Ruff • 2 days ago − ⚑

the corruption is such they always declare themselves the winners, they bought all the branches of goverment
△ ▽ • Reply • Share ›

ennio > Chesley Ruff • 2 days ago − ⚑

Sure it's really easy to change a dictatorship that has all the power and military backing them up.
△ ▽ • Reply • Share ›

berniegoetz > ennio • 2 days ago − ⚑

And the money. The government controls the oil revenue. Venezuela is run by racketeers who will steal until there is
nothing left to steal. The government won't last and will leave Venezuela a wasteland.
△ ▽ • Reply • Share ›

biden_jose • 2 days ago − ⚑

This is all academic. Maduro will end of raising some nominal sum of money (like $10 million) and quietly scrap the whole thing. No rational
actor would actually purchase the Petro. His claims of $1 billion raised have absolutely no credibility. I'll believe it when I see it.
△ ▽ • Reply • Share ›

Arnold Axe • 2 days ago − ⚑

It is time for a hardfork! Petro Cash is Maduros real vision, not this Petro Core! Btw. It is Petro Cash not Pcash!!!
△ ▽ • Reply • Share ›

adfourall classified • 2 days ago − ⚑

All crypto currency news, blog, events. This application is very accurate with proof of source. Link:
https://play.google.com/sto...
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