Venezuela has started to pre-sell its commodity-backed ‘Petro’ cryptocurrency, calling it the world's "first state-issued cryptoasset." Venezuelan President Nicolas Maduro declared on Tuesday “Petro is born, and we are going to have a total success for the welfare of Venezuela.”
The Petro token is backed by Venezuela's oil, gas, gold, and diamond reserves, with the price for a single Petro being pegged directly to the price of one barrel of Venezuelan oil. Venezuela has allocated five billion barrels of oil to back the Petro. 38.4 percent of the Petros will be sold in the pre-sale private auction at a 60% discount.
Petros are "pre-mined", meaning the government produces it and controls its release. The Petro's value is tied to the cost of a barrel of Venezuelan oil. At the current price equivalent of $62 USD per barrel, the 100,000,000 Petros up for grabs in the pre-sale could help raise around $6 billion USD equivalent.
Venezuela intends for the Petro to help it overcome huge trade deficits caused by US and European sanctions. Venezuela will first use the Petro to pay for imports from Brazil. A group of Brazilian companies have already agreed to receive payment for the sale of food to Venezuela through Petros. Turkey and Qatar are buying Petros during the pre-sale, apparently as a speculative investment.
The basic idea to back a cryptocurrency with a hard commodity seems to be a good one. Even so, there has been surprisingly little support for this initiative in the cryptocurrency community, and Venezuelans themselves are doubtful that the Petro project will succeed. The opposition-controlled National Assembly party has opposed the idea of the Petro, labeling it illegal. The U.S. Treasury Department has warned that buying the Petro would violate sanctions against Venezuela, which prohibit the purchase of any newly issued Venezuelan debt. President Maduro does not consider the sale of the Petro as an issuance of debt since it is backed by a commodity, though ownership of a Petro doesn't actually translate into ownership of any exchangeable concrete asset.
The Petro is being sold in hard currency and other cryptocurrencies, but not in the local Venezuelan bolivar currency. Its distributed ledger will be built out on the Ethereum blockchain platform.
The Petro will go on sale to the general public in March, though it is unclear how Venezuelan citizens could come to use and benefit from it in everyday life. A few merchants have already pledged to provide goods and services in exchange for Petros, with Maduro promising that "In a short future Venezuelans can buy in the bakery with the Petro."
By: BGN Editorial Staff