Venezuela’s Minister of Housing and Habitat, Ildemaro Villarroel, through a video on Twitter, says that the high energy consumption due to the operation of cryptocurrency mining farms can harm the country’s electricity distribution.
Cryptocurrency has been the subject of much discussion since its appearance in 2008. Some criticize it as “anti-system” and others find a refuge in it, like Venezuela. In the case of this country, which has seen its currency rendered virtually worthless after suffering one of the worst periods of hyperinflation since the Second World War, digital assets such as Bitcoin have become one of the few alternatives.
In other words, Bitcoin and other digital currencies are a lifeline for many people in this struggling Latin American country. Indeed, it turns out that the country’s economy has been in a huge drop since President Nicolás Maduro came to power in 2013.
In mid-2019, more than three million Venezuelans left the country, as essential goods such as toilet paper and medicines became unaffordable for a majority of the population and crime also soared.
According to Bloomberg data, a cup of coffee that cost 150 bolivars (0.000662 US Dollar) in November 2018 cost in 2019 almost 18,000 bolivars (0.0795 US Dollar), an increase of 11900%. A university professor who earns 2.5 million bolivars a month earns just enough to buy about a kilo of meat or a dozen eggs with each paycheck.
According to Christopher Sabatini, senior researcher for Latin America at Chatham House, this situation is “the worst economic and humanitarian crisis in the world, in which there has never been a war”.
Faced with this economic and political crisis, the government wanted to implement an initiative to allow the country, on the verge of bankruptcy, to circumvent the blockade imposed by the United States and thus launched in February 2018 its own crypto, the Petro, normally backed by oil. It is even the first country in the world to have its own sovereign cryptocurrency. At the time of the launch, the Venezuelan central bank began selling 38.4 million petro, the equivalent of 2.3 billion dollars.
However, critics say it is a sham and there is no evidence that anyone is using the petro. Moreover, the economic and political instability of the country undermines confidence in the currency. In spite of everything, Nicolas Maduro announced having collected 735 million purchase intentions “in less than 24 hours.
According to Steven Malca, the president of the South American Initiative, an American NGO which provides humanitarian aid:
“There are a lot of cryptocurrency, but not all of them are accessible as is the case in the US and other countries. The Venezuelan government has not banned crypto as such, but it prefers people to use what it calls “petro”.
However, turning to cryptographic currencies for survival leads to the growth and development of the crypto mining industry in the country.
Unfortunately, Venezuela has long had problems with its electricity system, especially after the blackout in 2019 when a power cut affected the whole country. However, with an increasing number of new miners every day, the exploitation of cryptographic currencies has become a billion dollar industry, hence the decision to ban the mining of cryptocurrency.
According to an announcement by Venezuela’s Minister of Housing and Living Conditions, Ildemaro Villarroel, on 15 July, crypto mining operations will not be allowed in state-owned housing or neighbourhoods that are part of the “Gran Misión Vivienda” (Great Domestic Mission) project.
Villaroel added that:
“It is forbidden to install mining equipment for crypto mining in the urban plans of Gran Misión Housing Venezuela because of its high energy consumption.»
He also pointed out that this was a violation of the government’s electricity distribution policy. However, the country’s miners have already stated that the power outage the country faced was not due to high consumption, but rather to failures in the national power grid.
“In this coordinated work, we have detected the adverse effects of these elements of high electricity demand in the public housing of the Gran Misión Vivienda project.”
Namely, Gran Misión Vivienda is a plan of the Venezuelan government to provide housing for low-income citizens in a context of long-term economic crisis that the country was already experiencing before the arrival of COVID-19.
Recently, the Bolivarian National Guard in Puerto Ordaz, Venezuela, seized 315 mining rigs manufactured by Bitmain after the owners of the rigs were told that they did not have the necessary permits to own and operate them.
What if this decision is simply another way of preventing citizens from getting their hands on anything other than Petro’s parts? However, the country’s miners have already stated that the power outage the country faced was not due to high consumption, but rather to failures in the national power grid. In any case, for the time being, it is indisputable that mining will be banned in any state-owned area.
Written by Laetisia Harson
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