Last month, we reported that Russia was putting its decision regarding Venezuelan cryptocurrency Petro on hold but now it seems it has finally taken a call on the same. However, the decision is far from a crypto-friendly one as Russia has declined the possibility of using Petro, Venezuela’s oil-backed cryptocurrency to power the bilateral deal.
At the same time, Russia does recognize that Venezuela has done the best it could have in order to deal with the pressures of its economy spiralling out of control, by introducing Petro. Having said that, it is not on board with Venezuela’s suggestion to use it as a part of their trade deal.
As per reports from the Russian news outlets, it seems Russia is keen to assist the struggling economy otherwise, offering the capital at Caracas aid with a bunch of policies to reign the hyper inflated economy in. Instead of using the crypto solution so vehemently backed by Venezuelan President Maduro, Russian wants to take the traditional route, choosing to implement low-risk traditional economic reform measures.
Among the measures suggested, tax reform with a heightened emphasis on indirect taxes seems to be the key takeaway. While we wait to watch if Venezuela heeds Russia’s economic advice, we must ponder over why Russia chose to steer clear of accepting crypto.
As we discussed in our article “Will Petro Really Save The Venezuelan Economy?“, the hugely hyped cryptocurrency offering backed by oil is plagued by several issues. Most important, perhaps, is the fact that little change can be expected with Petro at the forefront unless underlying systemic changes are implemented. The Government, whose alleged corruption and chaotic economic administration at least partially triggered the economic meltdown, remains at helm. With it, and with little active reform in the administrative and political front, Petro is unlikely to much beyond stirring up what is already a hot mess.
Will the Russian decision prove to be the most prudent one? An analysis of how the situation plays out in the long run is the only thing that would tell.
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