In a recent interview with Reuters in Caracas, Hermann Escarra, a prominent member of Venezuela's National Constituent Assembly, disclosed that the assembly is preparing a comprehensive constitutional reform that would establish a central bank specifically for crypto assets and a court that ranks above the Supreme Court of Justice. This announcement marks the latest effort by the government of President Nicolás Maduro to institutionalize its state-backed cryptocurrency, the petro, within the country's legal and financial framework.
Key Elements of the Constitutional Reform
Escarra stated: “The National Constituent Assembly of Venezuela is preparing a reform to the Constitution that would include a central bank for crypto-assets and a superior court to the Supreme Court of Justice.” He elaborated that the envisioned central bank would assume responsibilities in exchange rate, monetary, and financial policies, while the new court would hold authority above the existing Supreme Court. The draft changes are expected to be presented to the assembly's board within 35 days, according to Escarra.
The call for a constituent assembly was initially made by Maduro in May 2017, aiming to replace the 1999 Constitution drafted under his predecessor Hugo Chávez. The assembly elections were held in July 2017, but the process was marred by controversy. Opposition activists denounced it as unconstitutional, while supporters argued it would bring peace to the deeply polarized nation. The inclusion of a crypto central bank in the reform signals the government's intent to create a legal underpinning for its digital currency initiatives.
The Petro: A Controversial Digital Currency
Venezuela launched its oil-backed digital currency, the petro, in February 2018, claiming it would help bypass U.S. sanctions and attract foreign investment during the country's severe economic crisis. However, the petro has been met with widespread skepticism. As Reuters reported, “Cryptocurrency experts have said the petro suffers from a lack of credibility because of a lack of confidence in Maduro’s government and the mismanagement of the country’s existing national currency.” No independent verification has been provided for the petro's fundraising figures or its actual backing.
In June 2018, Maduro dismissed Carlos Vargas, the superintendent of cryptocurrencies who was in charge of promoting and selling the petro, replacing him with Joselit Ramírez. Economist Víctor Álvare commented to El Nacional: “The measure is a revelation that the objectives, goals and expectations of obtaining 5 billion dollars from the petro were not met, a matter that practically disappeared from the official discourse.” This move underscored the failure of the petro to gain traction as a viable financial instrument.
Linking the New Bolívar to the Petro
Despite these setbacks, Maduro announced on July 25, 2018, that the country's new currency, the Sovereign Bolívar (Bolívar Soberano), would be pegged to the petro. The new currency was scheduled for release on August 20, 2018, as part of a redenomination effort to curb hyperinflation. Critics argue that tying the national currency to an unverified digital asset such as the petro introduces additional risks and lacks transparency, potentially exacerbating the economic turmoil.
The proposed constitutional reform, if enacted, would create a dedicated central bank for crypto assets, giving the petro and other digital tokens a formal place in Venezuela's financial architecture. However, with the petro's credibility in question and the ongoing political and economic instability, the feasibility and international acceptance of such a move remain highly uncertain.
As the 35-day timeline unfolds, the world will watch whether Venezuela can implement this unprecedented crypto-centric constitutional framework or whether it will become another chapter in the country's troubled experiment with digital currencies.