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Venezuela

Bitcoin, Petro, Libra ... Why Cryptocurrency Isn't Really Currency

Cryptocurrencies are not so much money as flexible 'assets' that may be used in payments, without (yet) the universal credibility of a hard currency.

Virtual worth
Virtual worth
Farid Kahhat

-Analysis-

LIMA — How does one know that a political entity qualifies as a sovereign state? This was easy in the past: an entity was sovereign if it could impose on those living in its territory payment of taxes, military service and a legal currency. After obligatory military service has disappeared in many countries, the emergence of cryptocurrencies like bitcoin is now raising doubts about the state's monopoly, or at least the formal monopoly it enjoyed, in emitting money.

Yet calling entities like bitcoin "currency" is in fact to use the word metaphorically. Cryptocurrencies do in fact perform certain functions of a currency (like serving as a form of payment), but experience suggests this is not their principal utility. Some central banks and regulatory bodies in fact refer to them as crypto-assets. They are more specifically seen as financial instruments like bonds or shares.

This is far from being an arcane debate as its conclusion will determine the way authorities will regulate these entities (I call them entities as the consensus on their existence does not extend to what on earth they actually are). For example should their owners pay taxes? If so, would they be income or capital gains taxes? Their definition would also establish the risks their use implies (like money or asset laundering or tax evasion). There is evidence for example that cryptocurrencies are habitually used (usually illegally) in so-called "wash trading," or fictitious cryptocurrency transactions intended to boost its value.

The petro is different because it's backed by a state.

Two recent developments add relevance to this discussion. One was Facebook"s new, putative cryptocurrency the Libra; the other, the Venezuelan government's version, the petro. The latter was intended to permit the Venezuelan government access to resources in a context of international sanctions and scarcity of foreign exchange. We say the petro is a cryptocurrency because that is how the Venezuelan government terms it. In fact the petro lacks two of the attributes that at one point made cryptocurrencies like bitcoin attractive to investors. One is their private nature and decentralized management. The petro is also different because it's backed by a state and its natural resources (oil, gas, gold and diamonds in Venezuela"s case).

Money and cryptocurrencies differ as the strength of national currencies or their purchasing power (of goods, services and other currencies) is thought to rest on factors like sound fiscal and monetary policies, or central bank reserves. The petro currently has none of these. As for resources like oil, they are being used as guarantees for the Venezuelan government's previous loans and existing obligations.

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Economy

France, Portrait Of A Nation In Denial — In Our World In Denial

The continuous increase of public debt and a tone-deaf president in France, the rise of authoritarian regimes elsewhere in the world, the blindness to global warming: realities that we do not want to see and that will end up destroying us if we do not act.

Photo of ​police forces in riot gear clashing with demonstrators as piles of garbage burn in Paris on March 23

Police forces clashing with demonstrators as piles of garbage burn in Paris on March 23

Les Echos

-Analysis-

PARIS — In France, the denial of reality seems to be the only thing that all of our public figures have in common: The president (who is right to say that it is his role to propose unpopular measures) refuses to see that other solutions than his own were possible and that institutions will not be sufficient in the long term to legitimize his solitary decisions.

The parliamentary opposition groups refuse to see that they do not constitute a political majority, since they would be incapable of governing together and that they have in common, for too many of them, on both sides of the political spectrum, left and right, only the hatred of money, the mistrust of success, and the contempt for excellence.

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