How does the petro crypto currency work
Venezuela launches Petro crypto currency
The "Cambridge Center for Alternative Finance" published a study last year that every fifth central bank would launch its own cryptocurrency based on "Distributed Ledger" technology by 2019 (as reported by Fund Trends). There is a lot of discussion about this topic. Venezuela announced the first phase of a state cryptocurrency on Tuesday.
Nicolas Maturo's government believes that "petro-crypto currency" is a means of improving the financial budget despite the sanctions. The Petro (PTR) is the world's first state crypto asset and is secured by the Venezuelan oil reserves. The petro is accepted as an official means of payment for taxes and public services. Venezuela has the largest oil reserves in the world, but has been in crisis for years. Citizens, according to the government website, can download their personal "wallet". The so-called "pre-sale", which began yesterday as a token based on the Ethereum blockchain, can, according to a white paper, be converted into Petros. The first day of sales alone brought in $ 736 million. Venezuela wants to emit a total of 82.4 million Petros with 100 million units each, the so-called "mene". If successful, Venezuela could hypothetically raise up to $ 2 billion.
Petros can only be paid with "hard currencies" and other crypto currencies and not the devalued bolivar. Around 70% of the income from the offer will flow into a sovereign wealth fund and 30% should end up in "Ecosystem Development" and "Technical Development". The reference price for a petro is the current price for a barrel of oil, around $ 60. Carlos Vargas, the country's cryptocurrency overseer, said the Petro will attract investors from Qatar, Turkey and other Middle Eastern countries, and Europeans and Americans will also attend. The Americans, on the other hand, warn against buying Petros. This is a violation of US sanctions because it is a loan from the Venezuelan government. The punitive measures, which were tightened in 2017 by US President Donald Trump, prohibit investing in newly issued bonds from the country or from the state oil company PDVSA.
Dependence on Russia
Venezuela sees the launch of the crypto currency as a way out of the sanctions, as does Russia, which is also toying with crypto currencies. American restrictions make it extremely difficult for both countries to obtain US dollars in order to conduct economic transactions. Cryptocurrencies would partially bypass the influence of the Americans in trading and thus the burden of US sanctions. To what extent Venezuela will succeed in this remains questionable. Although the petroleum is backed by oil, many of the Venezuelan oil projects are in Russian hands.
Hyperinflation, a sign that a country is not in control of its economy, has made the bolivar virtually worthless. The Central Bank of Venezuela (BCV) has abolished the fixed exchange rate of the bolivar and adapted it to the Dicom system, which uses an auction process to set the rate according to supply and demand. Admittedly, the fact that funds flow into so-called "Joke cryptocurrencies" such as "Doge" may be a reason for Venezuela to believe that internal problems can be solved with this. But in terms of Venezuela's history and the country's risk of colliding with American overseers, the new currency makes it look more like the old one - even if adorned with crypto glitter.
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