The Petro cryptocurrency has reportedly raised over $735 million during its first day of sale, according to Venezuelan President Nicolas Maduro. President Maduro made the announcement through his official Twitter handle on Tuesday evening, but he did not offer any evidence to prove his claims.
Taking a Giant Leap Into the 21st Century, and More
President Nicolas Maduro introduced the Petro cryptocurrency in December 2017. He described it as Venezuela’s bold step into the 21st century, and the petro cryptocurrency was particularly notable because it was the first cryptocurrency to be launched and backed by a sovereign state. However, it was more than just a leap into the 21st century for Venezuela – it was also a way of overcoming the financial difficulties plaguing the country.
Venezuela is currently grappling with a wide range of sanctions imposed by the United States, in conjunction with the European Union. The sanctions are meant to pressure the current regime into making changes that will embrace democracy and put it in line with the global trend. These sanctions have crippled its financial sector, and this has resulted in an acute shortage of vital supplies such as food, water, and medicine. Consequently, many Venezuelans are migrating to neighboring countries in a bid to seek greener pastures.
Since cryptocurrencies are beyond the reach and regulation of governments and global organizations, Venezuela adopted the Petro cryptocurrency as a way of bypassing the sanctions imposed on it.
Technical Obstacles and Resistance From All Sides
Venezuela is blessed (and cursed) with the world’s largest reserves of crude oil. In fact, it designed the Petro to be backed by oil – one unit of the Petro is worth one barrel of oil, with the current value set at the previous day’s closing value. However, although the idea of an asset-backed cryptocurrency sounds appealing to many, the fact that oil isthe asset, in this case, has brought about several obstacles including:
- The price of oil is volatile considering the complexity of the industry
- Oil is a depletable asset, and one cannot practically exchange Petro units for barrels of oil
In addition to these technical obstacles, the Petro has also been met with resistance from both inside and outside the country. The Venezuelan opposition has labeled it as a scheme to enhance corruption, since it is not regulated. Outsiders including the U.S. and EU, on the other hand, have raised concerns about the efficacy of sanctions placed on Venezuela in the wake of the Petro launch.
As such, although it seems that the Petro has enjoyed a good start (of course, we can’t be sure since there is no evidence), it still has a lot to overcome.
Have you heard of the Petro cryptocurrency? Would you invest in it? Share your thoughts with us in the comments below.