CARACAS – Venezuela has launched the “world’s first sovereign cryptocurrency”, El Petro, in an attempt to bypass tough economic sanctions imposed by the U.S. government.
The oil-backed “Petro” is intended to bolster the country’s crumbling economy, which has been suffering from hyperinflation and devaluation for years.
The cryptocurrency will attract investments from Turkey, Qatar, the U.S., and Europe, the country’s crypto-currency regulator, Carlos Vargas, the government’s cryptocurrency superintendent, told reporters.
Skeptics say that concerns about Venezuela’s financial solvency will likely limit investor interest, and the U.S. Treasury Department has warned the Petro may violate sanctions against the OPEC (Organization of Petroleum Exporting Countries) nation.
The sanctions – levied last year by Washington – block U.S. banks and investors from acquiring newly issued Venezuelan debt, effectively preventing the country from borrowing abroad to bring in new hard currency or refinance existing debt.
President Nicolas Maduro, who announced the Petro’s launch in December, has said each tokens will be backed by a barrel of Venezuelan crude. The South American country has the world’s largest proven oil reserves.
Maduro has repeatedly said that his country is the victim of an “economic war” – prompted by financial sanctions imposed by the United States – and that the sale of the new digital currency will help the country circumvent this problem.
A total of 100 million Petros will be sold, with an initial value set at $60, based on the price of a barrel of Venezuelan crude in mid-January.
Venezuela’s Superintendence of Crypto-currencies and Related Activities as well as the Blockchain Observatory, will regulate how the Petro, which is “backed” by 5 billion barrels of oil reserves, functions. “This is going to allow us to move forward to new ways of international financing for the country’s economic and social development,” Maduro said.
The official website published a guide to setting up a virtual wallet in which to hold the cryptocurrency, but did not provide a link for actually doing so on Tuesday.
There was also no information on exchanges.
Venezuela’s economic crisis has largely been triggered by a slide in oil prices and production, which accounts for 96% of export.