Venezuela plans its own cryptocurrency – the “petro”

Global Business

Inflation in Venezuela is the world’s highest. Some estimates put it at around 2,500 percent The local currency, the Bolivar, has lost almost all of its value against the dollar on the black market.

The situation is further complicated by U.S. sanctions against what it says is an undemocratic nation. U.S. financial institutions are prohibited from dealing in new-issue Venezuela debt.

But President Nicolas said he has a solution.

Stephen Gibbs reports.

Maduro has announced that Venezuela will launch a cryptocurrency, called the “petro.”

Details are still pending, but he has indicated it will be home-mined, and backed up by the country’s oil reserves, with its value linked to the price of oil.

“For each petro a barrel of oil. That’s the value. Every petro will be worth a barrel of oil,” said Maduro.

The Venezuelan government has set up a “National Association of Cryptocurrencies.” At a conference in Caracas in November, its members – firm supporters of the government – backed the idea.

“Cryptocurrencies and the petro will offer several solutions for us. We are not only looking to avoid any type of sanctions on our country, we are also looking to democratize worldwide finance,” said Jose Angel Alvarez, Venezuelan Cryptocurrency Association

But there are skeptics. Some question whether this is an attempt to launch a cryptocurrency, or whether President Maduro is in fact seeking to refinance Venezuelan debt.

The president has stressed that the money will be backed by Venezuelan oil. The opposition sees that as a way of mortgaging off the nation’s as yet un-extracted reserves.

“The petro cannot be, is not seen as a currency, as a cryptocurrency. Why Because of the centralized issuance of the petro by the government, by the Venezuelan government. The best way to understand the petro is an issue of external debt,” said Jos Guerra, a Venezuelan opposition economist

And there was some confusion on the streets of Caracas about what the petro really might entail.

“I think I understand pretty much the petro is, but I am not sure the government does! Because the petro can’t be a crypto-money unless you allow a block chain – if everyone cannot mine it there’s no petro, or at least no cryptocurrency,” said one man in Caracas.

The question is: Can a government launch its own cryptocurrency, or is the whole point of digital currency that it’s free from state control? It’s a question being asked not just in Venezuela, but around the world.