The Venezuelan government’s ideology of centralized control of the economy has led to its collapse into hyperinflation. Now Nicolas Maduro’s regime is bringing that philosophy to the decentralized world of Bitcoin mining.
A decree published on Sept. 22 by the National Superintendency of Crypto Assets and Related Activities (SUNACRIP) has informed Venezuelan bitcoin miners that they must participate in a national pool, which will distribute mining rewards, according to an article by local news source Cryptonoticias.
SUNACRIP will also oversee and license mining farms and the use or manufacture of mining hardware—and taxing and distributing the rewards earned.
“The problem is that this system is vulnerable to the pool operator collecting taxes from the miners, freezing their funds or even delaying payments, even if they have worked,” Cryptonoticias pointed out.
Which is about as close to 180 degrees away from the founding philosophy of Bitcoin creator Satoshi Nakamoto as you can get.
“The root problem with conventional currency is all the trust that’s required to make it work,” Nakamoto wrote in the Bitcoin whitepaper. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”
Venezuelan hyperinflation is currently at 15,000% in 2020, according to the International Monetary Fund. That’s from its high of more than 65,000% in 2018.
This decree does mark the beginning of legal Bitcoin mining in Venezuela, the world’s third-largest user of cryptocurrency in everyday life, according to Chainalysis. Venezuela also launched the world’s first national crypto currency, the Petro. But its government control has seen its value crash.
In 2020, Venezuela was the 9th-largest bitcoin miner by hashrate through April, according to the University of Cambridge’s Centre for Alternative Finance.
In June, the U.S. placed a $5 million bounty on the head of Joselit Ramirez Camacho, the Superintendent of Venezuela Government Cryptocurrency. That came after he was indicted for money laundering, violating U.S. sanctions, and working with designated drug kingpins.