Venezuela has started the world’s first sovereign cryptocurrency. The Petro will be backed by some of the country’s massive crude oil reserves, as well as its storehouses of gold and diamonds. President Nicolas Maduro hopes the Petro will help solve the nation’s economic problems.
President Maduro made the surprise announcement about the development of the cryptocurrency on state TV a couple of weeks ago. Maduro said, “We have plans for the Petro to be used in pension funds for all state workers, for our youth, our middle class, and all national tourism.” News stories and talk shows promote its benefits, and government-run social media is constantly running advertisements.
The country is planning to promote the currency abroad. Venezuela hopes to attract billions of dollars from foreign investors with the sale of the Petro. To fuel demand, the government guarantees that it will accept the Petro as payment for taxes and fees. Yet there is no way to exchange the digital currency for any hard assets.
Rather than create a blockchain system from scratch, Venezuela’s Petro architects decided to build the Petro on top of the Ethereum network. Maduro announced that 40 million Petros would be sold through private negotiations, giving the government room to offer wide discounts to institutional buyers. The sale is to be opened to the public on March 20.
A 27-year-old Venezuelan technology entrepreneur named Gabriel Jimenez said he’s spent months helping develop the concept of the Petro. Jimenez has been part of a government team working in secret to study cryptocurrencies. He says he hasn’t been paid for his work and will be compensated only in Petros if the endeavor is a success.
Venezuela’s currency has become nearly worthless as quadruple-figure inflation now values the highest-denominated bill (100,000 bolivars) at just 50 cents. Local banks are limiting customers to withdrawals equivalent to just a few cents a day and ATMs across the country are empty.
The country has also been coping with a raft of U.S. sanctions cutting it off from the global financial system. Sanctions issued by the Trump administration prohibit the purchase of new securities issued by Maduro’s government and ban business dealings with Finance Minister Simon Zerpa, Vice President Tareck El Aissami, and other top officials.