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March 22 2018, 05:56 | Irvin Gilbert
Venezuela launches its own oil-backed cryptocurrency called “Petro”
The petro is the first digital currency to be issued by a federal government.
Petro is set to go live next month, and the Venezuelan government is said to be working with potential investors from Europe, the US, Turkey and Qatar - although it remains to be seen who they are, and whether they can be persuaded to actually invest. The price of Petro to the cost of a barrel of Venezuelan oil, that is 60 dollars at the moment, but will be adjusted depending on fluctuations in the markets.
Currently, Venezuela is under economic sanctions by the U.S. and the European Union, and raising funds in dollars from around the world will help the government resume global trading without depending on the American banking system.
Now the real challenge for the financially-struggling country begins - finding more investors willing to put their money in a country plagued by economic and political issues.
In a recent tweet, Venezuelan oil minister P.P. Petróleo revealed that Maduro has ordered the country's state energy company, PDVSA, to close a few deals using the coin. Venezuelan opposition refused to sign the agreement with the country's authorities calling it "unworthy".
At the time, the government said the cryptocurrency would solve the country's grave economic problems, largely caused by the policies of Maduro's own government, and his predecessor Hugo Chavez.
Despite being previously disclosed in a whitepaper provided by the government, the petro will not be a token on the Ethereum network.
The president announced that a total of 100 million tokens of currency will be released, of which 82.4 million will be available to investors.
It's the claim that US investors are among the Petro buyers that is raising eyebrows.
Some US lawmakers have also expressed concerns about petro, and asked the country's Treasury Department in January to monitor and restrict the currency. That's because of the strict sanctions the US has in place for the South American country over its government operating like a dictatorship, among other issues. This included a warning to users on the security aspect.
Washington has past year levied sanctions, blocking United States banks and investors from acquiring newly issued Venezuelan debt.
Meanwhile, consulting firm Eurasia Group estimates that although Venezuela could raise some $2bn in the initial offer, it is "unlikely" that the Petro will be established as "a credible means of exchange", beyond short term "interest". Because of that, it could expose US citizens to legal risks. The International Monetary Fund reckons inflation in Venezuela is on track to hit 13,000 percent this year.
As Bitcoin mania took over the world, governments the world over considered launching their own digital currencies.