Delving into “Petro”, Venezuela’s own bitcoin |

ICOs

Cryptocurrencies have become the new sensation in the world now. Many see it as investment opportunities whiles others consider it as real assets. Despite its flaws, it seems the cryptocurrency train is not ready to stop anytime soon with many new players jumping on board.

It was just a matter of time for countries to also get mixed up with what many people call the future of finance. The Venezuelan government on Tuesday announced the launch of its very own form of cryptocurrency called the “Petro”. This initiative by a country was something inevitable as the Bitcoin fever had proven to be getting only worse.

This move comes as a result of the deep economic crisis which has seen the Venezuelan currency (bolívar) turn into nothing more than a hyperinflation and worthless commodity. Nicolas Maduro, president of the country has reportedly stated that each petro token will receive the backing of a barrel of the nation’s petroleum and adds that almost 100 million petro tokens with a value of $6 billion will be assigned. With this, the Venezuelan government hopefully will get back on their feet after experiencing some form of political negligence and cut off from many international financing.

The South American country boast of the world’s largest oil reserves and the decision to back the Petro with its oil barrels is aimed at reinforcing its economy. According to the government, the Petro will be accepted as payment for national taxes and public services amongst others. The digital currency will also be sold by the government for both fiat currencies and other cryptocurrencies but will not accept the bolívar.

The digital currency was first unveiled last year and in one of his regular broadcasts on Sunday, President Maduro stated that the petro would help the country to “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”

Driving forces behind “Petro”

Whiles many Venezuelans will be happy to have a digital currency of their own, Maduro and his government, on the other hand, sees this move to be a way of escaping the current economic meltdown. The government has set its sights on raising over $2 billion with this initiative, thus according to many experts.

Details of the sectors which will benefit from the funds have since been released by the government. A total of 44% will be allocated for the public offering whiles 38% of the coins are reserved for a discounted closed-door presale. The remaining 18% will be distributed to the Superintendency of Currency and Related Activities. 82.4 million Petro’s will be issued by the government in total with none of them redeemable for barrels of crude oil.

Criticisms and Outside perceptions

It seems not everybody is on board with this Maduro’s new cryptocurrency idea. A few days have barely passed but that hasn’t stopped criticisms from pouring in. Starting in the same country, Venezuela’s opposition-controlled congress has already declared the new digital currency illegal, citing the law that the legislature must approve any government borrowing, something President Maduro didn’t adhere to. In a recent speech, lawmaker Jorge Millan stated that” “The petro is not a cryptocurrency. This is a forward sale of Venezuelan oil.”

David Smilde, a sociology professor at Tulane University, an expert on Venezuela’s economic conditions also commenting on this issue said: “The Petro will most likely suffer all of the same ills as Venezuelan debt.”

Other critics also see this as a plan to evade U.S sanctions and while doing so, the Petro will turn into a “shitcoin” which will come back to bite them.

Venezuela is currently under economic sanctions by the EU and U.S and therefore sees this as an opportunity to raise funds in dollars from all over the world which will land them a place in international trading without dependence on the US banking system.

The US Treasury has also joined the action and this time, expressing concern about this whole thing, issuing a warning that purchasing the new Petro could mean a violation of sanctions which forbids the purchase of the Venezuelan debt.

“The petro digital currency would appear to be an extension of credit to the Venezuelan government and could, therefore, expose US persons to legal risk,” a spokesman warned, adding that “It is another attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.”

President Maduro is however not having any of the criticism, insisting that, the Petro will be a hit rather than a miss. “The future is now,” he said in a speech about the digital currency.  “Venezuela is moving forward as an economic powerhouse,” he added.

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