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Venezuela’s president announced that it will implement a new economic reform which will peg the country’s bolivar currency to the state-backed petro cryptocurrency.

Nicolas Maduro, the president of Venezuela, stated that this plan will require the bolivar to go down from 285,000 per dollar to 6 million, which would signify a devaluing of 96 percent. Venezuela’s inflation is expected to reach 1,000,000 percent this year, but it is yet unknown how Maduro’s approach will alleviate this economic crisis.

The currency reform will also be involving higher minimum wages, corporate tax rate increases, and bigger gas prices subventions.

“I want the country to recover and I have the formula. Trust me,” stated the president on state television on Friday. “They’ve dollarized our prices. I am petrolising salaries and petrolising prices.”

We are going to convert the petro into the reference that pegs the entire economy’s movements.”

What Value Does the Bolivar have in Venezuela’s hyperinflation?

The petro cryptocurrency was issued by the state earlier this year, with the initial intent of complementing Venezuela’s plummeting currency, bypassing US sanctions and allowing access to international financing.

Cryptocurrencies are known for their massive price fluctuations, with bitcoin going from a December’s high of $20,000 to $5000.

To avoid such high volatility, the petro was backed up by the country’s reserves of oil, gas, gold, and diamonds, but this tethering has been questioned and dismissed by most of the crypto world.

Almost immediately after its launch, US President Donald Trump released an executive order which banned American residents to make any investments in the Venezuelan crypto.

The Weiss Cryptocurrency Ratings expressed its belief that petro was destined to fail, and that it lacked any explanation as to how the cryptocurrency would be pegged to oil prices.

“We now have the first-ever state-sponsored cryptocurrency. But it’s not exactly time to celebrate,” posted crypto expert Juan Villaverde in the financial rating agency’s blog.

“The petro is a worthless token that may or may not be usable for paying taxes in Venezuela.”

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