President Nicolas Maduro of Venezuela has announced the official launched the oil-backed cryptocurrency, Petro, in a televised address to the crisis-struck country.
Petro, the Oil-Backed Digital Currency
In a bid to recover from the economic crisis that Venezuela currently is in, President Nicolas Maduro in a televised address earlier on Tuesday announced the launch of the Petro in global markets. Petro is a cryptocurrency that according to the latest white paper is backed by oil, gold, iron and diamond assets.
According to Venezuelanalysis.com, Maduro also said that the Petro would be available on six leading international exchanges starting Monday, October 8th. He, however, did not mention the names of the platforms on which the digital asset will be listed.
The president, referring to the country’s gold, diamond, iron, and aluminum, said:
The Petro, unlike other digital currencies, doesn’t need to be mined because it already has a value, it is shielded with Venezuelan oil and mining wealth.
“All Venezuelans will have access to the Petro and through it to make international purchases,” he said, adding that Petro coins are now a legal substitute to dollars in real estate deals as well as paying for goods such as airline tickets, hotels and the like.
According to Maduro, the official website of the Petro is live, and the wallet is also available for download from the google play store. Public sale of the cryptocurrency will begin on November 5th.
Venezuela’s Economic Woes
The country has been facing a financial crisis for multiple years with inflation reaching almost one million percent mark, and 2.3 million people have fled the country. The country’s local currency, Bolivar, has been losing its value leading people to lose faith in it and buying into Bitcoin instead. According to Coin Dance, a statistics website, the weekly trade of bitcoins in bolivars has grown 58-fold since January this year.
Launching a state-run digital currency is an attempt to end the deepening financial crisis. All oil purchases in and out of the country, henceforth, need to be made using Petro, as per the announcement.
Reactions from Around the World
The international crypto community has viewed these developments with doubt and skepticism. Unlike other blockchain projects, which are mostly open-source, there is not much information available to verify the claims made by the government. There is no correct information available on the quantity of oil Venezuela produces.
According to Nomura, a financial services firm, oil production in the country has been declining by 50,000 barrels a day, the fiscal deficit is about 20% of GDP, and there is very little economic data from the nation. And the data coming out cannot be trusted or verified. In February this year, the government had claimed that it had raised $735 million in an ICO but this has not been corroborated.
Alex Tapscott from the Blockchain Research Institute says:
Reaction from the cryptocurrency community has been a mixture of dumbfoundedness and anger.
Despite the attempt by the government of Venezuela to create hype around Petro, there is more doubt than excitement surrounding the launch. Given the fact that there is no transparency yet that is required for a digital asset backed by a commodity, it is to be seen how many investors would want to put their money behind the Petro when it becomes available on the exchanges.
In your opinion, will the state-backed Petro be a success or a failure? Let us know in the comments below.
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