Venezuela to Launch Virtual Currency Tied with Petroleum and Mineral Reserves

Feb 09, 2018 at 12:29

Venezuelan president, Nicolas Maduro has proposed a “joint cryptocurrency mechanism” backed by oil within the Organization of the Petroleum Exporting Countries to support the country’s new state-backed cryptocurrency.

Last December, Maduro announced the launch of the cryptocurrency called Petro that is backed by Venezuela’s oil, gas, gold and diamond reserves.

The new currency is seen as part of the country’s efforts to resolve an economic crisis and food shortages as well as circumvent United States sanctions. As much as five billion barrels of oil has already been allocated to back the new digital currency which will be tied to the cost of a barrel of Venezuelan oil.

However, the Venezuelan government clarified that Petros cannot be exchanged for oil but will be accepted as payment for taxes and fees.

The country expects to release around 38.4 million Petros of a total 100 million units on February 20, with a series of discounts applied to stimulate early demand. Reuters also reported that the virtual currency will also be pre-mined meaning that new tokens are not going to be created unlike bitcoin.

The report added that buyers will be able to purchase Petro through online exchanges while some exchanges would also make it work with bolivars, Venezuela’s local currency. The said cryptocurrency is also expected to be able to exchange for other cryptocurrencies.

Venezuela also mentioned about its plans to launch an international campaign to promote the Petro abroad, prioritizing the country’s political allies and developing countries.

However, the US warned that buying the Petro virtual currency could violate sanctions against Venezuela, which prohibit the purchase of newly issued Venezuelan debt.

“The Petro digital currency would appear to be an extension of credit to the Venezuelan government … [and] could, therefore, expose US persons to legal risk,” a US Treasury spokesman who requested anonymity told Reuters.