Corruption scandal shakes cryptocurrency ecosystem in Venezuela

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

The government of Nicolás Maduro bet heavily on crypto assets as a way to circumvent US financial sanctions against Venezuela, and even launched a state cryptocurrency, the petro, in 2018.

Things, however, took a turn: the state National Superintendence of Crypto Assets (SUNACRIP) became entangled in a corruption scandal in PDVSA and other companies and state institutions. The plot has left dozens of officials detained and led to the resignation of the once powerful oil minister, Tareck El Aissami.

The case

After complaints from the prosecutor’s office of irregularities in the management of funds from oil operations carried out with cryptoactives, the president of the superintendency, Joselit Ramírez, was arrested in March, as was the head of digital mining operations of the institution, Rajiv Mosqueda.

Investors in cryptocurrencies assure that, in the midst of investigations, multiple orders to shut down digital mining farms (centers where these assets are produced) and exchanges (crypto exchange platforms) have paralyzed the local ecosystem.

The AFP consulted with judicial sources on the number of farms and exchanges affected, without response so far.

“They are torpedoing mining. Find out what you have to find out, but why do you have to turn everything off?”, Humberto Quevedo, director of the private National Association of Cryptocurrencies (ASONACRIP) and the specialized platform CryptoLand Venezuela, asked in dialogue with AFP, who asks for more “transparencyfrom the authorities.

“Do you have a problem and your solution is to grab a machine gun and kill everyone?”, Questions Quevedo.

The Superintendency of Cryptoactives is now under the control of an oversight board, but its headquarters have remained closed since Ramírez’s arrest. Even the silver metallic letters of the ‘SUNACRIP’ sign at the doors of the building in downtown Caracas were removed, AFP found.

Cryptocurrency use was high in Venezuela long before Maduro’s bet on the petro. These crypto assets were seen as a refuge against chronic inflation and the constant depreciation 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 proliferated in the last decade in Venezuela, driven by the low cost of the energy necessary for its production or ‘mining’, despite severe power supply problems. Persecuted at first, the government authorized it when it turned to crypto assets and fostered it with state mining farms.

The SUNACRIPcreated in 2018 by the Maduro government, granted operating licenses.

“All the people who tried to legalize their status (before SUNACRIP) are exposed”, tells AFP Luis -a fictitious name to protect his identity-, who shut down two bitcoin mining farms in which he had some 500 machines. “Those who did it anonymously are better off“, he complains.

“I removed the farms. It is absurd that they come and force you to turn everything off until further notice. All this returns us to a legal limbo”, he adds.

failures 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 chain of blocks of the petro, technology that allows registering operations in that cryptocurrency,”was paralyzed, making transactions impossible”, indicated a statement released by the CryptoLand platform over the weekend.

The chain of blocks or “blockchain”, paralyzed since Wednesday, was briefly reactivated on Saturday, to then freeze again until Monday.

A probable system error in the prices, which made it possible to acquire petros at prices well below the market, preceded the situation.

“Let’s hope that little by little all the services and derived App (applications) will be restored”CryptoLand posted on Twitter.

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

Source: AFP