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Venezuela Gets Closer to its ‘Petro’

Priyeshu Garg
Last updated: | 2 min read

The pre-sale of the Venezuela’s oil-backed national cryptocurrency, the petro, will begin on February 20, while President Nicolas Maduro is clearly hoping that the release will ease some of the country’s current economic hardships, according to CNBC.

In the meantime, critics are up in arms over the government’s plan. A bold move on empty coffers, the motion is widely seen as a spurious attempt to trade on cryptocurrency’s current enchantment.

However, Venezuelan President remained upbeat when announcing the offer on 30 January 2018, in spite of it being labeled a debt issuance by detractors. Critics point to the fact that the entire proposition flies in the face of the country’s laws, and the proposed cryptocurrency is essentially illegal. The offer is backed by Venezuelan crude oil, something the parliamentary opposition has made expressly clear that is forbidden by law.

The details of the offer point to an overall value of USD 6 billion for the issuance, with the projected earnings on the presumption that the market accepts the offer as valid and agrees to terms at hand. Maduro mooted a total issue of 100 million tokens recently, each “redeemable” at the value of a single barrel of crude

In January, a newly-formed advisory group to the Venezuelan government, VIBE, have recommended that 38.4 million of the country’s newly formed oil-backed cryptocurrency, the petro, be sold at private placements at a discount of up to 60%, as reported.

Muddying the concept of cryptocurrency, Maduro said on national television that “all the cryptocurrencies of the world have been revalued after Venezuela’s announcements about the creation of the petro,” while critics dismissed this bold statement as wishful thinking.

Moreover, Maduro’s socialist government has feted the issuance as a means to combat American sanctions. It hopes it will enable financial transactions and the preservation of normality in many critical public service arenas.

Venezuela has been looking for avenues down which to raise some cash, embroiled as it is in a crippling economic crisis. It’s not great timing, as the value of Bitcoin has slumped in the first month of 2018. Yet it appears the Venezuelan government is out of options, as it desperately needs some hard currency to inject life into the economy.

The USA has taken issue with the proposal, warning its citizens of possible prosecution in terms of the current sanctions. It has claimed that “[buying] the petro digital currency would appear to be an extension of credit to the Venezuelan government,” and that additional credit would not solve the larger problem at hand.