petro gold

Why Digital Gold Is Better Than Physical Gold: A Political Example

The Bank of England has reportedly refused to hand over Venezuela’s gold reserves of over USD 550 million amid  growing concerns that the country’s politician and president of the United Socialist Party of Venezuela, Nicolas Maduro will liquidate the 14 tons of gold for his personal gains.

Venezuela is interesting from a crypto investor’s view as the country has issued its own gold-backed digital currency, called the petro gold, in the aftermath of the record-breaking inflation that marred the country’s economy. Interestingly, the soaring inflation also sent Bitcoin trading volumes to new levels in mid October 2018.

In a recent news Donald Trump imposed various sanctions on the South American country’s gold industry. Perhaps this move to take the gold  from the clutches of UK’s government by the Venezuelan government was taken out of fear of losing it through increased sanctions and a possible seizure. Even though the sanctions imposed by the US government are not applicable to the Bank of England, however UK being an ally of the United States, it seems that the United States holds sway in such matters.

We would like to think that the Venezuela’s gold reserves might be plenty and stored in different places, however looking at the government’s previous bad economic decisions, it appears that half a billion that is currently held hostage by the Bank of England is all it may have after all.

A smart decision for a country like Venezuela which has its own cryptocurrency should have been to have sold the gold for Bitcoin well in advance to avoid such potential sanctions and become its own bank. Bitcoin overrides any such sanctions as it cannot be censored. Hence, the cryptocurrency or digital gold has the answer to Venezuela’s economic woes.

A transfer of gold back to the country would not have been able to do much good for Venezuela; cryptocurrencies, on the other hand, are tied to Smart Contracts. Hence, any use of the currency outside of the bounds of smart contract would simply be eliminated, therefore Maduro couldn’t possibly steal it for his personal gains.