On Dec. 3, Venezuelan president Nicolás Maduro announced that the country would create the “petro,” a “cryptocurrency backed by reserves of Venezuelan wealth – of gold, oil, gas and diamonds.”
The government intends to issue 100 million petros, with about 38 million going to institutional investors in a month-long presale set to begin Feb. 15 that officials expect will bring in as much as $1.3 billion, according to draft documents. An additional offer to the general public will follow at a higher price, with 44 million petros estimated to fetch as much as $2.4 billion in total. The rest of the coins will go to the government and a panel of advisers who helped the country set rules for the token.
Each coin would be backed by one barrel of Venezuelan crude, though the coins can’t be exchanged for the actual oil. Officials expect a higher price in the second sale after the initial auction demonstrates that demand for the cryptocurrency exists. Each petro will be divisible by 100 million units and the minimum exchange unit will be called the mene, according to the draft proposal, which could change before the currency is launched.
According to Reuters, the Venezuelan government might be planning to launch the pre-mined petro on the Ethereum network. Cryptocurrency advisers to the Venezuelan government in a recently formed group called “VIBE” have recommended a private, discounted sale of $2.3 billion worth of the oil-backed cryptocurrency. The discount could be as high as 60 percent.
The US Treasury Department warned American investors that dealing in the “petro” cryptocurrency may be considered a violation of sanctions imposed against Caracas by Washington.
Last week, the Venezuelan parliament, Asemblea Nacional, prohibited the creation of the petro. “This is not a cryptocurrency, this is a forward sale of Venezuelan oil,” said one lawmaker. “It is tailor-made for corruption.”
The petro is part of Venezuela’s efforts to lift its economy out of one of the world’s deepest recessions amid a crippling shortage of hard currency and U.S. sanctions that have cut off President Nicolas Maduro’s more traditional financing options. It also seeks to take advantage of the worldwide interest in digital tokens amid a runup in prices for Bitcoin and smaller rivals including ether and ripple.
It is evident that something will need to change in Venezuela sooner rather than later. Right now, the country’s financial situation is far too dire to leave things unchecked. Citizens are struggling to get basic necessities like food, water, and medicine. Given Venezuela’s weak position at the negotiation table, it is evident the country will need to get creative in its approach to solving this problem once and for all. Creating its own national oil-backed cryptocurrency may very well be the only way out.
Venezuela’s Information Ministry did not immediately respond to a request for comment.