Struggling Venezuela to start selling 'petro' cryptocurrency

Katrina Barker
February 21, 2018

Its price is pegged to the average daily price of a barrel of Venezuelan oil, now around $60.

"The new cryptocurrency will be backed by reserves of Venezuelan wealth in gold, oil, gas, and diamonds".

The Venezuelan government has launched its new cryptocurrency, the petro, as the country struggles amid USA sanctions and soaring inflation.

While it might make sense for a cash-strapped country to try and bring in new funding via such a token sale, the petro has been controversial from the get-go.

Cryptocurrencies by design are decentralized financial systems, so one created by a government runs contrary to that spirit and creates an opportunity for manipulation, said Leidenz. The petro does not give investors any ownership stake in Venezuelan oil. But many economists argue that the petro won't solve Venezuela's many problems, including food shortages, plummeting oil production and a mass exodus.

Venezuela's President Nicolás Maduro urged President Donald Trump to change his agenda of aggression and asked him to fulfill his campaign promise of "non-interference". "I announce as a proposal that I will take to the pertinent instances, to call, on the day of the Presidential elections, elections for the National Assembly also to fill that void”, Cabello said during a live interview on state televisión network".

It's unclear how much demand the petro will draw.

The US Treasury Department, however, has warned potential investors that buying "petro" may violate sanctions that stop US banks from buying debt from Venezuela.

Since then, however, Trump's administration has slapped new sanctions on Venezuela, on top of those imposed by the preceding Obama and Bush governments, citing opposition allegations of fraud in several elections previous year.

Warwick Business School's assistant professor of finance, Dr Daniele Bianchi, said: "Indeed, the very fact Petro is being backed by oil is somewhat questionable".

It has faced world wide criticism though, with the biggest coming from China, who have launched yuan-priced oil futures, and are trying to persuade the top producers to trade crude in its national currency. They can't buy it with Venezuela's official currency, the bolivar, which is worth almost nothing because of hyperinflation.

Justice First, the country's largest opposition party, announced on Tuesday that it would not be participating in April 22 elections.

Secretary of State Rex Tillerson said on a recent trip to Latin America that the United States is considering a ban on Venezuelan oil, the only viable source of income for Maduro's government.

Other reports by AllAboutTopnews

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