Are National Cryptocoins Helping or Hurting the Case for Crypto?

[Pegasus]

In late 2017 and early 2018, national stablecoins were the talk of the industry. Rumours–some confirmed, some unconfirmed, that Estonia, Sweden, Iran, Russia, Venezuela, and others may be exploring the launch of a national stablecoin spread like wildfire.

Many believed that the launch of national cryptocurrencies was the thing–the thing that would finally prove cryptocurrencies as a valid transactional instrument, as a worthy investment, as more than just a passing fad.

However, the hype around many of these national cryptocurrency projects–just like the hype around many cryptocurrency projects–came and went. In most cases, national crypto initiatives faded out of the spotlight or disappeared altogether; in the worst cases, these national crypto projects were used as vehicles to avoid international sanctions and commit large-scale financial crimes.

How have these projects evolved over the last year? And how have they influenced the world’s view of cryptocurrency?

Whatever Happened with the Petro?

Perhaps the most infamous example of a national cryptocurrency gone wrong is the Venezuelan Petro. The Petro, a cryptocurrency that is allegedly backed by oil and other commodities, was launched by President Nicholas Maduro as a possible solution to the country’s financial crisis. Hyperinflation has struck the nation’s economy so severely that in the worst of times, a loaf of bread costs close to 500,000 Bolivars.

At the launch of the Petro, the Venezuelan government is alleged to have allocated 5 billion barrels of oil to it. Each single Petro coin was worth one barrel. The government said that the Petro would be “a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”

Preceding the launch of the Petro, the Venezuelan government came under fire from other government bodies around the world, which accused the country of developing the Petro as a way to evade sanctions and access international debt markets. Some governments even barred their own citizens from taking part in the Petro’s token sale.

Almost immediately after the launch of the Petro, accusations emerged that Maduro and his associates were directly involved in a huge money-laundering scheme with the Petro at the center of it. More specifically, the allegations were made in connection with the $735 million that was raised within hours after the Petro went public.

Unfortunately, the allegations were eventually proven to be true. A Latin American exchange firm that conducted a technical audit of the Petro discovered that exactly none of the funds that were allegedly pumped into the Petro project ever actually existed on the blockchain. Additionally, a number of companies that Maduro had named as participants in the project either never existed or denied their involvement entirely.

“The mention of agreements with the ghost company ‘Aerotrading’, does not figure in the [Petro’s] ecosystem of development and neither on the internet,” a report by the company read (translated from Spanish.) “In addition, the Zeus company dissociates itself from the agreements made, while the Venezuelan government is still naming the companies and the NEM foundation as the parties directly responsible for the integration of the Token [Petro].”

Suspicions were raised even higher when a Reuter’s investigation conducted in August of 2018 revealed that the man who had been named as Venezuela’s Superintendent of Cryptocurrencies did not have an industry in the Ministry of Finance, and that the office’s promoted website did not exist. Ataparire, the parish where the project’s oil reserves were supposedly based, had seen no oil-related activity; oil rigs found in the area appeared to have lain abandoned for some time.

Additionally, Reuters could not identify any actual human being that had been able to buy the petro at all. In the end, it seems that the project was one giant lie.

As you can perhaps imagine, this did not do wonders for the cryptocurrency industry. Most of the public saw yet another example of cryptocurrency being linked with illicit activity. However, the debacle did serve as a learning experience for governments interested in learning how to better regulate their own interactions with cryptocurrency projects.

The US Fights Against the Iranian ‘PayMon’

Another national cryptocurrency project that has garnered quite a bit of negative attention is the Iranian PayMon, a digital currency that would be backed by national reserves of gold. Similar to the Petro, the project has been criticized for having been developed as a method of evading international sanctions.

Anticipating these, US lawmakers introduced a bill due impose further sanctions that would hinder the develoment and use of the PayMon. The “Blocking Iran Illicit Finance Act”, which was published in late 2018, would place sanctions on foreign indivudals who are involved in the transfer, holding, sale, or supply of the PayMon.

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