In February, Venezuelan President Nicolas Maduro announced the release of the Petro, a controversial digital currency backed by the country’s oil reserves. This week, according to Venezuela’s Official Gazette, it has been ordered that the token must be accepted as legal tender for all transactions involving government institutions — from ministries to airports, to taxes, fees, and other public needs — within 120 days.
The country’s Cryptocurrency Treasury will be in charge of overseeing all aspects of the plan, from the tokens release to trading, according to the gazette published on April 9th. The government named Abrahan Landaeta to head up the Cryptocurrency Treasury and Anthoni Camilo Torres as head of virtual exchanges.
Petro: State-Sponsored Digital Currency
The decree is meant to help bring the Petro into everyday use, but a host of challenges may make it difficult to put the crypto policy into practice, as many aspects of the token still remaining a mystery. In fact, some crypto-rating websites have already judged it to be a scam: Hong Kong-based cryptocurrency exchange Bitfinex recently refused to list the Petro, arguing that the digital currency offers “limited utility” and that listing the first ever state-issued digital currency “could be construed as an attempt to circumvent legitimate sanctions against the government.”
With the Petro, Venezuela is seeking to take advantage of global enthusiasm for blockchain-based assets and help lift its economy out of one of the world’s deepest recessions amid a crippling shortage of hard currency. The International Monetary Fund forecasts inflation will hit 13,000% by the end of the year, while the economy is set to contract 15%.
As part of the nationwide effort to boost the Petro, a national virtual miner registry was opened, and “Petro zones,” where the tokens will be accepted, were created in popular tourist destinations along the country’s western border. In a speech last week, Maduro said the country had purchased 30 ambulances using the digital coin.
Despite the apprehension in the crypto-space, last month Maduro said Venezuela had received offers of as much as $5 billion from countries including China, Russia, and Mexico for the tokens. As of yet, there’s little evidence to support this.
Skirting Sanctions
According to Time Magazine, there is evidence to suggest that the Petro was ushered into existance by Russian officials, bankers, and businessmen. The theory is that Russia and Venezuela want to use the digital currency as an experiment in dodging U.S. sanctions placed against both countries.
President Donald Trump, believing the Petro to be simply an extension of credit to the Venezuelan government, issued an order prohibiting U.S. citizens from engaging in transactions using the token. The Treasury Department called it:
Despite the launch of Petro as its own national cryptocurrency, there is growing demand for Bitcoin in Venezuela. In March, a new record was set for Bitcoin trading in the country, with a total value of over 1 trillion Bolivares worth of BTC changing hands. The country is plagued by massive inflation, which forces the Venezuelan people to find alternate ways of storing value.