Venezuela launches its own oil-backed cryptocurrency, the 'Petro'

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Venezuela has become the first country in the world to launch its own cryptocurrency.

The "Petro" was released for pre-sale to invited investors at midnight on Tuesday. Its price is pegged to the average daily price of a barrel of Venezuelan oil, currently around 60 US dollars.

President Maduro has said the total offering will be currently worth 6 billion US dollars, making it by far the world’s biggest digital currency launch of its kind, although initial sales are expected to be at a heavy discount in order to attract interest.

Venezuela’s cryptocurrency superintendent, Carlos Vargas, said the token, which is based on the Ethereum network, is being bought by investors in Qatar, Turkey and other Middle Eastern countries, as well as European nations and the U.S.

The move is in part designed to side-step sanctions by the United States, which last year accused the leftist Maduro government of undermining democracy, and prohibited US investment houses from trading in new-issue Venezuelan debt.

Banners depicting Venezuela's currency, the Bolivar, at the Central Bank of Venezuela (BCV) in Caracas, January 31, 2018. /VCG Photo

Washington has warned that investment in the Petro could also violate those sanctions.

Venezuela is in the midst of an economic meltdown, with annual inflation predicted by the International Monetary Fund to hit 13,000 per cent by the end of this year.

Productivity at the nationalized oil company PDVSA, the country’s main source of foreign income, is at historic lows. The Venezuelan opposition says that is the result of years of under-investment and corruption.

To fuel demand for the Petro, it will be accepted as payment for local taxes. The token may also in part replace cash, which is in desperately short supply, with banks limiting withdrawals to the equivalent of just a few US cents a day.

Launching the token, President Maduro said “Petro is born and we are going to have a total success for the welfare of Venezuela.”

Daniele Bianchi, who researches cryptocurrencies at the Warwick Business School in the UK, was sceptical.

“The Petro experiment certainly represents another milestone event in the ICO [Initial Coin Offering] universe,” he said. “However, as of now at least, it looks more an attempt to raise funds out of desperation.”