2018 Stories

The $5 Billion Petro Controversy

Today we’re going to be doing a throwback segment, looking at one of the most monumental and impactful moments in the crypto industry in 2018. In this video, we’re going to have a quick overview of the Venezuelan Petro and why it turned out to be an epic fail.

Right now, many countries are exploring the possibility of launching a state-backed cryptocurrency. Venezuela has, however, taken it to the next level by launching their own cryptocurrency token called the Petro. According to the Government, the Petro is backed up by precious resources such as oil, gas, gold, and diamonds, and was meant to help the country overcome their US and EU sanctions. President Nicolas Maduro was very confident with the idea. He noted, “Petro is born, and we are going to have total success for the welfare of Venezuela.”

While the token was designed to boost the Bolivar and aid the country’s inflating currency, international experts see the Petro as a scam on top of another scam. Wired reported that Maduro announced the Petro last December in 2017, during the rising cryptocurrency bubble, but they were trying to raise billions of dollars with an extremely vague and unclear whitepaper. The event was quite shocking to many in the cryptocurrency community, but it did capture great attention – as it was the first time a Government had issued their own digital token.

While cryptocurrencies are a fairly disruptive emerging technology, the Petro appears more like a scam and hoax. Despite, the Petro however, managed to raise a fairly large amount. During a pre-sale event, the Petro raised a total of $735 million. CryptoVest then reported that the Petro raised approximately $5 billion from the ICO, making it one of the most successful ICO’s in history. Dickie Armour an ICO consultant from Corre innovation mentioned that while It may be a stunt, it’s a stunt that is definitely working.” The sad fact is, is this stunt working for President Maduro and his cohorts or the people of Venezuela? Unfortunately, it’s more likely to be the former.

While the Petro raised a large amount, it has shown to neither be one thing nor another and is also banned in the wider international market. Although the prospect of a new digital currency may sound exciting, Farias Cryptobuyer mentioned to Wired that, once the initial excitement is over, people will realise what the Petro is or isn’t. “The government is probably hoping that Venezuelans will think Petro is the same as Bitcoin but it isn’t,” said Avivah Litan, a Gartner blockchain technology analyst. “Petro is a currency issued and controlled by the same incompetent, corrupt and opaque Venezuelan Government that manages their fiat currency. People aren’t stupid, and they won’t buy it.”

Despite the opposition, Venezuela moved forward with the Petro. According to Cointelegraph, the state-backed token is not available for purchase via fiat currency and cryptocurrencies. They can be purchased directly from the country’s treasury through the token’s official website or from six cryptocurrency exchanges that have been authorized by the government. These include Bancar, Afx Trade, Cave Blockchain, Amberes Coin, Cryptia, and Criptolago.

Coindesk recently reported that, while the Petro is performing poorly, the nation will sidestep the US dollar and begin to introduce the Petro token regarding oil sales in 2019. He mentioned that “In 2019, we have a schedule for [oil] to be sold in Petros and in this way continue to free us from a currency that the elite of Washington uses.” This isn’t the first time Maduro has enforced Petro. In October, the token had to be used by those looking to obtain passports. The Bolivar was also pegged to the Petro in July 2018.

Venezuela’s decision to launch their own cryptocurrency is an important aspect that not only affects the cryptocurrency industry, but foreign relations, trade, and the international global environment. Unfortunately, there are many consequences of the Venezuelan Petro. Not only does it impact the local people of Venezuela,  authorities and lawmakers in both Iran and Russia are also thinking of launching their own state-backed cryptocurrency. Alex Tapscott, the co-founder of the Blockchain Research Institute noted that these countries are all authoritarian (or deeply undemocratic), they have a lot of oil, and they are under sanctions.

Venezuela’s decision to launch their state-backed cryptocurrency is the classic example of how rogue government could use cryptocurrencies to try and get around international law treaties, sanctions, and cause further problems to their weak economies.

What are your thoughts on this situation guys? Do you think other rogue Governments will follow in Venezuela’s footsteps? And do you think there is anything that can be done to rescue the Petro token?

Let us know what you think. It’s Tem and Cindy with Cryptopig. Catch you guys around!

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Disclaimer: Cryptopig content is written by a team of blockchain passionate people. We are not registered as investment advisors. Don’t take the information in this post as investment advice and make sure you do your own research before investing. Cryptocurrencies are a very risky investment, never invest more money than you can afford to lose.

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