Venezuela Launches Its Oil-Backed Cryptocurrency Petrocoin to Save Economic Crisis

The country is heavily dependent on crude oil. Launching the cryptocurrency is an effort to ease effects of August 2017 sanctions

CRYPTO REVOLUTION IN VENEZUELA

Petrocoin, Venezuela’s new oil-backed digital currency could be the only hope to pull the country out of economic crisis. According to estimate, 1 Petro coin is worth $60 with about 100 million tokens to be issued.

The Venezuelan government has plans of making a legal tender. This means that citizens could pay taxes, fees as well as public needs using the digital coin.

“However, the petro’s price will depend on the price of a barrel of Venezuelan oil,” according to Petrocoin website.

CRITICISM AND DOUBT

Petrocoin is the first digital currency to be issued by a federal government. The initiative itself has long attracted criticism, mostly from lawmakers both inside and outside of the country.

Thus, citizens of the crisis-torn nation are struggling to cope with widespread food shortages. Moreover, around 75 percent of Venezuelans are reportedly suffering from weight loss and unemployment.

Harry Colvin, a director and senior economist at Longview Economics, stated that he was “doubtful” the coin would be a success.

POTENTIAL PROBLEMS

Crude production in Venezuela has been steadily declining as the oil-dependent state slogs through a crisis precipitated by years of government mismanagement as well as exacerbated by a prolonged oil price slump.

One of the potential problems of petrocoin is its dependency on the current government. However, petrocoin will be made illegitimate if Maduro loses an election in April says, Colvin.

At the start of the year, the U.S. Treasury Department warned traders against investing in the petro.

LOOKING AHEAD

With the sale launched, observers will have to wait and see what kind of attention it attracts.

According to the roadmap published on the petro website, Venezuela plans to launch an exchange for the token next month. The government aims to complete any adjustments necessary for its network by the end of March. Since these adjustments, full use of the token expected to begin in April.

Maduro has constantly said he believes the petro will be a great success story. However, in a speech promoting the token’s launch, he said: “The future is now … Venezuela is moving forward as an economic powerhouse.”

Garrick Hileman, a cryptocurrency researcher at the University of Cambridge, said,

“In some ways, I think this further validates cryptocurrencies, but at the same time, there are a tremendous number of questions around the petro. Will it be redeemable for the assets that are underlying it? Thus, how decentralized will it be? What exchanges will it be traded on?.

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Franklin Odoemenam

I'm a cryptocurrency enthusiast, researcher, and blogger. Find all his articles, written on cryptocurrencies during the period

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