Venezuela’s state-backed cryptocurrency, the Petro, is a “half-hidden joint venture” between Venezuelan and Russian officials and businessmen, according to a new report by Time. The petro, which first went on presale on February 20th, is the world’s first state-backed cryptocurrency.
Its value is tied to the country’s oil reserves. Sources told Time that the aim of the petro was to erode the power of US sanctions. Venezuelan president Nicolás Maduro has previously referred to the petro as “kryptonite” and the US government as “Superman.”
“Petro is born, and we are going to have a total success for the welfare of Venezuela,” President Nicolas Maduro aid on Tuesday. According to Maduro, petro raised $735m in its first pre-sale day. But the question on everyone’s mind is, what exactly is Petro, and why does it matter?
What is the petro?
The idea for the petro came from Hugo Chavez, who had foreseen a “strong currency backed by raw materials”, according to the government’s white paper on the petro.
Announced in December 2017, the petro is intended to supplement Venezuela’s bolivar fuerte (VEF) currency and help overcome US sanctions
Petros will be “pre-mined”, meaning the government would produce and control it.
Venezuela has allocated five billion barrels of oil to back its new digital currency, which will be tied to the cost of a barrel of Venezuelan oil.
Where can you buy it.
Initially, the petro will be sold in hard currency and other cryptocurrencies, not in the local bolivar currency.
“The presale and initial offer will be made in hard currencies and in cryptocurrencies,” Carlos Vargas, the government cryptocurrency superintendent, told state television in late January.
Vargas also said that after the initial sale, the petro could be sold in exchange for the bolivar.
On March 23, President Maduro announced that “all citizens and companies will be able to purchase ‘petros’ on a specialised website with yuans, rubles, Turkish liras, and euros, as well as with cryptocurrencies such as bitcoin, etherium and NEM.”
How much does it cost?
Each petro will be backed by a barrel of oil and will be sold at the same price, according to the government. Prior to the launch, government advisers recommended that 38.4 percent of the petros should be sold in a pre-sale private auction at a discount of 60 percent.
The Trump Administration
Earlier this week, the Trump administration issued an executive order prohibiting US citizens from purchasing the petro, which Maduro hopes will raise $6 billion and help shore up the country’s failing economy. Venezuela’s currency, the bolívar, has suffered from hyperinflation as a result of government mismanagement and US sanctions. The US has also frozen assets of four current and former officials of the Venezuelan government.
Cryptocurrencies could be an effective form of skirting sanctions. Time reports that Russia floated the idea of creating a digital version of the ruble, but Russia’s central bank said it would risk destabilizing the ruble itself.
“So Russia made its stronghold here in Venezuela,” Armando Armas, an opposition member of Venezuela’s parliament, the National Assembly told Time. “Now they are using Venezuela as a guinea pig for their experiment.”