Venezuela have announced that they will launch Petro; their own cryptocurrency in order to help the country’s failing economy. The government have said that every Petro coin will be backed by the value of a barrel of oil, and plans to circulate 100 million Petro coins, in order to raise $6billion. The president, Nicolas Maduro said;
“Petro is born and we are going to have a total success for the welfare of Venezuela.”
However, his optimism is not shared by all and opposing politicians argue that the virtual currency is actually illegal. This is because the country’s constitution states that the huge amount of oil reserves that they have cannot be used as a guarantee for financial operations.
Just like Bitcoins, transactions are anonymous, and are recorded through the blockchain. Despite cryptocurrencies being very much a thing of the present, analysts are comparing Petro to a government bond.
SO why now? Venezuela has been experiencing an economic collapse, due to low oil prices. This means that they are also experiencing a shortage of food and medicine. Inflation is at an all time high, and they have capped the maximum withdrawal from an ATM to the equivalent of 4 cents. This has led to many citizens to turning to online payments. Dany Bahar, a global and development expert said;
“The state of the oil industry is Venezuela is collapsing. The economic situation is so bad that it’s created the worst humanitarian crisis the hemisphere has seen. And it’s the most distorted market. Everything is collapsing. The markets aren’t going to be fooled by a cryptocurrency, Venezuela owes so much money.”
The online currency can be used to pay for goods and services; however, they will not be able to use their own traditional currency to cryptocurrency. The virtual currency’s website says;
“The Bolivarian Republic of Venezuela guarantees that it will receive Petro as a form of payment for national taxes, fees, contributions and public services, taking as a reference the previous day’s Venezuelan oil basket price with a discount.”
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