Venezuela launches its controversial oil-backed cryptocurrency, the petro

Violet Powell
February 21, 2018

The plan has divided opinion, with The Guardian questioning whether the new cryptocurrency could turn out to be "an ingenious plan to evade U.S. sanctions. or a South American s***coin" - adopting the slang term for digital currencies that become worthless over time.

There will surely be a lot of investors from Qatar, Turkey, and parts of the Middle East, though Europeans and Americans will also participate, Mr Vargas said last week. The International Monetary Fund expects inflation to soar by more than 2000% this year. "They will set up cryptocurrency mining farms in all states and municipalities of the country".

According to Reuters, the country's cryptocurrency regulator has said that 38.4% of the petros to be issued will be sold at a 60% discount. The Venezuelan Finance Ministry noted that cryptocurrency was necessary for carrying out financial transactions and searching for new financing options.

Mr Bianchi says that, rather than a cryptocurrency, the Petro is really an Ethereum-based token like many others being seen in the ICO eco-system.

"Clearly, the underlying logic of this ICO is to get around the financial sanctions imposed by the USA and Europe".

Opposition leaders said the sale constitutes an illegal issuing of debt, while the US Treasury Department warned it may violate sanctions imposed previous year.

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Russian President Vladimir Putin is also considering introducing a "cryptorouble" to get around worldwide sanctions.

Its dire economic situation has not been helped by financial sanctions imposed by Washington a year ago, leading to a dash for cash that critics say is the real driving force behind the launch of the petro.

"Petro will be an instrument for Venezuela's economic stability and financial independence, coupled with an ambitious and global vision for the creation of a freer, more balanced and fairer worldwide financial system", the government said in a 22-page white paper, translated into English, outlining its plans.

The petro is backed by Venezuela's vast oil reserves, with Maduro previously saying he would issue 100m tokens backed by 100m barrels of oil, giving the digital coin a market value of about $6bn (£4bn).

It is not the first time that an oil backed cryptocurrency has been suggested; Kuwaiti officials suggested a platform to trade oil in Bitcoin in 2014; however this failed to materialise.

"The country is fighting quadruple-digit inflation with crude oil production down about 29 percent in 2017". The government has been in default on some of its debt since November. But he cautioned that significant questions remain, like whether a third-party auditor will be able to verify exactly how many barrels are on hand to back each petro and how.

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