Venezuela is launching a new cryptocurrency, hoping it will help circumvent U.S. financial sanctions and resurrect the country’s economy, which is known in crisis.
The pre-sale of the “petro”, this is it’s name, which will represent a barrel of crude from a specific division in the country’s Orinoco oil belt, started Tuesday morning. Investors were offered $60 “tokens” at discounted rates that they can exchange for petros during what is being considered an “initial coin offering” – or ICO – in March.
“Today is the day the Petro is born. We are on the world’s financial vanguard. Our response to great problems is great solutions and good will” – President Nicolás Maduro said in a televised launch event held on Tuesday night in the country’s presidential palace with media and investors. During the event he further said the project raised $735 million dollars on the first day.
On one hand, skeptics, however, have expressed doubts that the currency will thrive, especially due to lack of trust in a government whose debt is being renegotiated and whose policies have brought skyrocketing inflation. Further, the country’s once-thriving oil company, Petróleos de Venezuela S.A., is producing at its lowest levels in decades. Someone also says the project does not make sense as the government will have too much space to manipulate the coin.
Proponents, on the other hand, say that buyers may find the currency appealing because it is backed by a commodity and an administration with incentives to see it succeed.
Other cryptocurrencies are facing instability. Bitcoin, for example, soared more than 300 percent between August and December 2017, then plunged more than 50 percent to its current level.
As the first cryptocurrency officially launched by a government, the petro aims to offer a more “stable” option and may serve as an experiment for countries such as Russia, which also faces U.S. financial sanctions, and Russian officials have recently had the idea of creating a “cryptoruble”.
However, during the initial coin offering in March, the government plans to sell 82.4 million petros to the public at a discount from the official $60 value. People will then be able to buy petros from those who obtained them during the ICO.
What is more, Venezuelans would eventually be able to use the petro to make payments to public institutions, including tax payments, according to official documents explaining the initiative and no more than 100 million petros will be created unless the Superintendency for Cryptocurrency approves making more after counting holders’ votes, the documents say.