Countdown For Venezuela's Crypto Currency "Petro" Begins

Nicolas Maduro

Nicolas Maduro president of Venezuela launches $6bn cryptocurrency offering on Tuesday Wikimedia Commons

Venezuela formally launched its new oil-backed cryptocurrency on Tuesday in an unconventional bid to haul itself out of a deepening economic crisis. According to a survey conducted last week by the Caracas pollster Venebarometro, over 62% respondents said they believe that none of the options provided should be president.

Cryptocurrency experts are looking at Venezuela's foray into digital currencies with a mix of intrigue and suspicion, excited by the prospect of a government willing to accept cryptocurrency for payments like taxes but also concerned about the potential lack of oversight.

Scholars and economists have also pointed out the dubious nature of the petro. The International Monetary Fund expects inflation to soar by more than 2000% this year.

On Jan. 2, Russian President Vladimir Putin reportedly commissioned work to create a cryptocurrency as a tool to evade punitive trade measures.

Maduro's petro launch - announced at the heart of the most painful sell-off ever seen in the short lives of the cryptocurrencies - arrives as most are enjoying several days of gains.

"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.

Venezuelan President Nicolas Maduro began printing money in what was widely seen as a bribe for voters ahead of a controversial vote previous year to tighten his grip on power.

More news: Police name Netanyahu associates in corruption probe

"This is not a cryptocurrency, this is a forward sale of Venezuelan oil", said legislator Jorge Millan last month.

Other governments are also investigating the cryptographically secured architecture behind digital coins like bitcoin.

Specifically, the U.S. Treasury Department warned in January that Venezuela's proposed petro cryptocurrency could violate sanctions.

But the Peruvian government announced that it will not allow Maduro to attend, on the grounds that he has broken with his country's democratic institutional order.

The sanctions - levied a year ago by Washington - block U.S. banks and investors from acquiring newly issued Venezuelan debt, effectively preventing the country from borrowing overseas to bring in new hard currency or refinance existing debt. It has opened a registry for so-called "miners" who will be able to earn petros through a process of auditing online cyrptocurrency transactions.

Indeed, Maduro has often proven his doubters wrong.

President Maduro has said that each coin will be backed by one barrel of the state's petroleum reserve. Holders of petros would be unable to exchange them as their emission would likely be declared illegitimate by a new government.

Latest News