SAN FRANCISCO, Calif. – Venezuelan President Nicolás Maduro has just launched a presale for its cryptocurrency earlier today: the Petro. Officials explained previously in the announcement that there are currently 82 tokens available, which will be utilized in the first initial coin offering (ICO) next month.
Aside from being the first sovereign cryptocurrency, the Venezuelan government also intended for it to save the country from potential hyperinflation that can occur sometime in the future.
The Venezuelan fiat currency, the bolivar, has experienced wild inflation these past weeks, which has resulted in a USD exchange rate of 0.00004 per bolivar.
President Maduro said that he intends the digital coin to be an alternative currency in case the worst-case scenario will arrive. He plans to eventually issue 100 Petros, which will be backed by oil reserves.
Last year, Maduro had already disclosed to the public his plan to create a cryptocurrency for the nation. With that, he had also stated that the digital money would help the country in its financial blockade, which many people believe to be about the United States sanctions that were placed upon Venezuela.
In the president’s first statement, he had said that Petro was going to be backed by diamonds and gold. However, this was not feasible since Venezuela had no asset or currency that had high value.
Many officials do not fully support the Petro cryptocurrency. Some of them even likened the idea of Petro as that of an innovator, who typically has a ton of great ideas, only that the plans are not doable.
The country’s opposition-run parliament had expressed their disapproval for Petro. They had even warned investors to avert from the newly launched cryptocurrency because as soon as Maduro steps down from his office, the digital coin will cease to have value.
The promises made by the president is something to look forward to. However, in public opinion, many people side with the opposition parliament on this one.
The cryptocurrency idea arrived during a time when Maduro’s socialist government was in the midst of an economic crackdown.
Apart from hyperinflation, which threatens the country to this day, citizens are also suffering from food deprivation, as well as their devaluing fiat currency. Perhaps, what further haunts the president is the prediction of the International Monetary Fund that the said inflation will hit 13,000 percent this 2018.
On the other hand, there will be about 75 percent unemployed and malnourished people that will skyrocket to about 22 percent this coming year 2022.
Even Longview Economics director and senior economist Harry Colvin said that he is skeptic about the potential success of the Petro cryptocurrency.
Colvin also said that the Venezuelan government had already proven that it is not the best steward when it comes to asset allocation, and the central bank already caused hyperinflation. With that, he speculates that there will be a lot of trust and transparency issues following the crypto launching.
Another potential problem Colvin has seen in the Petro launching is the “oil-backed” part. He said that crude oil would most likely be derived from the Orinoco heavy oil belt in the eastern part of the country.
However, crude oil has already been declining in Venezuela due to years of government mismanagement, not to mention a prolonged slump in oil prices.
President Maduro is set for re-election this April. Colvin said that if he does not win the election or if he is forced out of power, then Petro will automatically lose its value. Almost instantly, Petro will become illegitimate.
From the beginning of this year, the Treasury Department of the United States has already warned traders against putting their money in Petro. Authorities have stated that investing in Petro would mean supporting the Venezuelan government, which would then violate the sanctions imposed on them this past August.
University of Cambridge cryptocurrency researcher Garrick Hileman said that Petro somehow puts cryptocurrencies in a positive direction. Anyhow, he still believes that there are lots of questions that need more concrete answers.
Hileman said that people have yet to find out if the assets which underlie the cryptocurrency are redeemable. Some of his other questions revolve around which exchanges can the Petro be traded on and how decentralized Petro can potentially be.
However, despite the negative press time that the Venezuelan president had gotten, he has proclaimed that he is positive that the Petro will result in a success story. Maduro stated in the launching of Petro that it is time for Venezuela to move forward.