In a move that the government hopes will bring much needed economic relief, Venezuela’s President Nicolas Maduro announced earlier this week that the pre-sale of the country’s new ‘petro’ cryptocurrency will begin on February 20.
A Cryptocurrency Backed by Crude
For years, Venezuela has been struggling with rising economic and political problems. The South American country has under heavy international sanctions due human rights abuse and corruption and, thanks to extreme hyperinflation, the bolivar has lost 97% of its value against the US dollar. President Maduro believes that a government-issued cryptocurrency may be the solution. In December of 2017, the Venezuelan government announced that it would issue its own cryptocurrency that would be backed by crude.
With this bold move, the government is hoping to bypass sanctions imposed by the US and be able to participate in international trade without having to rely on centralized financial institutions like banks. The government is planning to set up mining operations in schools and universities across the country in order to mine the crude-backed cryptocurrency.
Will the Petro Succeed?
President Maduro hopes that the ‘petro’ will be able to open more pathways for Venezuela economy. According to a recent Bloomberg article, he stated:
This is the moment to accelerate the entry of the petro, to have faith in what we’ve created and in the technological and intellectual capacity of our country,
He also added:
The petro will have a great impact, in how we access foreign currencies for the country and in how we obtain goods and services that we need from around the world.
The ‘petro’ will be sold through an Initial Coin Offering. The total supply will be around 100 million ‘petro’, 38 million will be sold to institutional investors and the rest through a public sale. Experts estimate that the ‘petro’ token sale will be able to raise as much as $2.4 billion, making it one of the biggest token sales yet. The government is also planning to implement the new cryptocurrency into state ID for government subsidies and restricted food.
What are your thoughts on state-backed cryptocurrencies? Do you think that the ‘petro’ will be able to help Venezuela’s economy? Let us know in the comments below!
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