Venezuela Pegs Minimum Wage to State Digital Currency

In a move that highlights the importance of digital currencies going forward, Venezuela pegged its minimum wage to its own state crypto.

On Friday, Venezuelan President Nicolas Maduro announced pegging the value of minimum wage to half a Petro, its state-sanctioned digital currency.

Although authorities modeled it on the Bitcoin fork Dash, Petro (PTR) is centralized around government issuance. That makes it more like a Central Bank Digital Currency (CBDC) than crypto.

Half a petro worth roughly 126 bolivars or $28. The move will increase the Venezuelan minimum wage 18-fold! The recent move is the first minimum wage increase since April 2021. Back then, the minimum wage was just 2$.

It is unclear whether Venezuela can afford this significant increase after seven years of hyperinflation. Last year, the country reached monetary stability by completely dollarizing the economy. They also eased restrictions on the private sector and cut the fiscal deficits. If the government finances the higher minimum wage with money printing, hyperinflation may return.

How is Petro used?

Most Venezuelans do not use PTR by choice, but rather out of necessity. For instance, the government provides pensions in PTR. Therefore they can use Petro for buying goods in supermarkets.

Outside Venezuela, it is harder to buy PTR and get more information about it. Its official block explorer website is unavailable. Moreover, it’s illegal to hold or trade PTR due to sanctions imposed by the Trump administration.

As trading in Petro is not legal, traders can’t buy it on mainstream crypto exchanges. However, there is a black market for crypto, mainly for Venezuelans that want to get out of the state crypto.

In theory, you can buy PTR with Bitcoin and Litecoin from the Venezuelan central banks or local exchanges. However, there’s a huge discrepancy between the central bank rate and the unofficial exchange rate.

Petro’s official site lists its price as $60, which did not change since its launch. This reflects how dollarized the Venezuelan economy currently is.

Why Petro?

Originally, Petro was a way for the country to avoid sanctions. Using Petro, Venezuela could leverage capital by leveraging its natural resources like oil. Apart from sanctions, the hard-money PTR would help Venezuela to handle the recession and hyperinflation.

However, the plan did not fly, partially due to the fact that the U.S. banned the state-sanctioned crypto. This made Petro unavailable on most mainstream exchanges, and out of reach of average investors.

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Moreover, Petro’s centralization contradicts the principles of the crypto movement. The state’s control over its blockchain turns away potential investors. As for the Average Venezuelans, they avoid holding PTR unless absolutely necessary and prefer using other cryptocurrencies.

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