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Venezuela Launches Oil-Backed 'Petro' Cryptocurrency Amid US Sanctions

Venezuela Launches Oil-Backed 'Petro' Cryptocurrency Amid US Sanctions

The government says the currency aims to circumvent U.S. sanctions on the economy. The International Monetary Fund expects inflation to soar by more than 2000% this year. Like the many other innovators thinking of new ways to use cryptocurrency, from reinventing old brands to sparking an investment boost for companies, the Venezuelan government's goals for petro are lofty and not fully attainable.

"There will surely be a lot of investors from Qatar, Turkey, and parts of the Middle East, though Europeans and Americans will also participate", Vargas said last week.

Dr Daniele Bianchi, of Warwick Business School, Assistant Professor of Finance, and researches cryptocurrencies, said that just "like an Initial Coin Offering (ICO), the Petro will be introduced through a pre-sale which will offer the new cryptocurrency at a discount. It represents the biggest ICO ever proposed, and if it hits its cap, around $5bn, that will represent about 5% of the entire total of Ethereum now circulating and will nearly equal the total revenue generated by ICOs in 2017". Opposition leaders have said the sale constitutes an illegal debt issuance that circumvents Venezuela's majority-opposition legislature, and the U.S. Treasury Department has warned it may violate sanctions levied previous year. "I announce as a proposal that I will take to the pertinent instances, to call, on the day of the Presidential elections, elections for the National Assembly also to fill that void”, Cabello said during a live interview on state televisión network".

It is worth mentioning, that the sanctions, put previous year by Washington, prohibit US banks and investors from buying just issued Venezuelan debt, in fact, keeping the country out from taking money overseas to bring in new hard currency or refund current economic burden.




"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.

Eventually, he plans to issue 100 million petros, backed by 100 million barrels of oil reserves.

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 government has been in default on some of its debt since November.

Mr Bianchi says that the very fact Petro is being backed by oil is also somewhat questionable.

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