The Venezuelan government is pressing ahead with an attempt to capitalize on the success of cryptocurrencies.
Venezuela has officially launched the pre-sale of its new digital currency called the petro.
“Petro is born, and we are going to have a total success for the welfare of Venezuela,” President Nicolas Maduro said on Tuesday. According to Maduro, petro raised $735m in its first pre-sale day.
The launch of the so-called “cryptocurrency” comes as Venezuela faces deepening economic and political crises.
According to the government, the petro is backed by oil, gas, gold and diamonds, and is meant to help overcome US and EU sanctions.
Here is what we know about the new currency.
The idea for the petro came from Hugo Chavez, who had foreseen a “strong currency backed by raw materials”, according to the government’s white paper on the petro.
Announced in December 2017, the petro is intended to supplement Venezuela’s bolivar fuerte (VEF) currency and help overcome US sanctions.
Petros will be “pre-mined”, meaning the government would produce and control it.
Venezuela has allocated five billion barrels of oil to back its new digital currency, which will be tied to the cost of a barrel of Venezuelan oil.
Initially, the petro will be sold in hard currency and other cryptocurrencies, not in the local bolivar currency.
“The presale and initial offer will be made in hard currencies and in cryptocurrencies,” Carlos Vargas, the government cryptocurrency superintendent, told state television in late January.
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Vargas also said that after the initial sale, the petro could be sold in exchange for the bolivar.
Each petro will be backed by a barrel of oil and will be sold at the same price, according to the government.
Prior to the launch, government advisers recommended that 38.4 percent of the petros should be sold in a pre-sale private auction at a discount of 60 percent.
Vargas said that each petro could be exchanged through the virtual exchange houses, “but in addition to that, there will be many merchants providing goods and services where you can go with your petro or any crypto currency to exchange it for a service”.
He added: “In a short future, Venezuelans can buy in the bakery with the petro.”
At current prices ($62 a barrel) 100 million petros could help raise around $6bn. The government argues this could help Venezuela pay part of the country’s obligations.
The Venezuelan minister of foreign trade, Jose Vielma Mora, announced that Venezuela would pay for imports from Brazil using the petro cryptocurrency.
“A group of Brazilian companies have agreed to receive payment for the sale of food to Venezuela, through petro, starting on February 20, when the pre-sale of the cryptocurrency [begins],” Vielma Mora added.
Brazil has not publicly commented on Venezuela’s planned use of the petro.
The opposition-controlled National Assembly has opposed the idea of the petro, labelling it illegal.