Venezuela: Corruption Scandal in the Country Rocks Cryptos – 05/30/2023 – Market

The world of cryptocurrencies in Venezuela, very active due to the search for refuge from inflation and the low cost of electricity needed to operate with these assets, has been rocked by a corruption scandal that has its epicenter in the oil company PDVSA.

The government of Nicolás Maduro bet on crypto-assets as a way to circumvent the financial sanctions of the United States against the country, even launching a state-owned cryptocurrency, the petro, in 2018.

Things, however, have changed: state-owned Sunacrip (National Superintendence of Cryptoassets) has been embroiled in a corruption scandal at PDVSA and other state-owned companies and institutions. The episode led to the arrest of dozens of officials and the resignation of the once powerful oil minister, Tareck El Aissami.

the case

After complaints from the Public Ministry about irregularities in the management of resources from oil operations carried out with cryptoassets, the president of the superintendence, Joselit Ramírez, was arrested in March, as well as the head of digital mining operations at the institution, Rajiv Mosqueda.

Cryptocurrency investors guarantee that, in the midst of investigations, several requests for the closure of digital mining farms (where these assets are produced) and exchanges (cryptocurrency exchange platforms) have paralyzed the local ecosystem.

The AFP has consulted judicial sources about the number of farms and exchanges affected, but has not received a response so far.

“They are torpedoing (cryptocurrency) mining. Find out what they need to find out, but why do they need to shut everything down?” said Humberto Quintero, director of the private National Association of Cryptocurrencies (Asonacrip) and the specialized platform CryptoLand Venezuela, which calls for greater “transparency” from the authorities.

“You have a problem and your solution is to take a submachine gun and kill everyone?” asks Quintero.

The Superintendence of Cryptoassets is now under the control of a supervisory board, but its headquarters have remained closed since Ramírez’s arrest. Even the silver metallic lettering of the “Sunacrip” sign on the doors of the building in downtown Caracas has been removed, AFP learned.

The use of cryptocurrencies was already on the rise in Venezuela long before Maduro’s bet on the petro. These crypto assets were seen as a refuge from chronic inflation and the constant devaluation of the local currency, the bolivar.

According to a survey presented last year at the United Nations Conference on Trade and Development, 10.3% of the Venezuelan population owns cryptos, compared to 8.3% in the United States and 5% in the United Kingdom.

Digital mining in “limbo”

The mining of cryptocurrencies such as bitcoin has proliferated in the last decade in Venezuela, driven by the low cost of the energy needed for its production or “mining”, despite severe energy supply problems. Persecuted at first, the government cleared it when it turned to crypto assets and boosted it with state-owned mining farms.

Sunacrip, created in 2018 by the Maduro government, has granted operating licenses.

“All the people who tried to legalize their status (before Sunacrip) are exposed,” Luis – a fictitious name to protect his identity – told AFP, who closed two bitcoin mining farms in which he had about 500 machines. “Those who did this anonymously are better off,” he complains.

“I eliminated the farms. It is absurd that they come and force everything to be shut down until further notice. All of this leads us to a legal limbo”, he adds.

glitches with the petro

At the same time, the environment has become even more difficult in recent days due to the stoppage of transactions with petros, without explanations from the authorities. The use of this cryptocurrency has always been practically restricted to operations with the State.

“Suddenly and without warning” the petro blockchain, the technology that allows you to register operations in that cryptocurrency, “was paralyzed, making transactions impossible,” said a statement released by the CryptoLand platform over the weekend.

The blockchain was briefly reactivated on Saturday and frozen again until this Monday (29).

The situation was preceded by a probable error in the pricing system, which made it possible to purchase petros at prices well below market prices.

“I hope that all derivative services and apps will be re-established little by little,” CryptoLand posted on Twitter.

Investors denounce that hundreds of petro user accounts were blocked on the government’s digital platform for social plans, which did not explain what happened.