Venezuela launches oil-backed cryptocurrency

Venezuela's new bitcoin: an ingenious plan or worthless cryptocurrency?

Sanctions levied past year by Washington block US banks and investors from acquiring newly issued Venezuelan debt, effectively preventing the nation from borrowing overseas to bring in new hard currency or refinance existing debt.

Venezuela is mired in a deep economic crisis triggered in large part by a fall in crude oil prices and a drop in oil production, which accounts for about 96% of the country's exports.

Theoretically, the petro is backed by Venezuela's reserves of precious metals like gold and crude oil.

The powerful Cabello told state television VTV he would make a formal proposal to the Constituent Assembly, which President Nicolas Maduro has used to sideline the opposition and strengthen his grip on power.

Venezuela's socialist party chief Diosdado Cabello said in radio interview on Tuesday that he proposes holding early elections for members of the country's National Assembly as well.

As reported by Reuters, the President also mocked the U.S by referring it to the comic character of Superman and said: "Today, a cryptocurrency is being born that can take on Superman".

In total, Venezuela plans to issue 100 million digital tokens, starting with a pre-sale of 38.4 million that starts Tuesday and whose reference price is the current cost of a barrel of oil, or around US$60 (NZ$82). On the other hand, the opposition leaders of Venezuela have also snubbed this move by saying "the sale constitutes an illegal debt issuance that circumvents Venezuela's majority-opposition legislature, and the U.S. Treasury Department has warned it may violate sanctions levied past year", reports Reuters.

Venezuela's new bitcoin: an ingenious plan or worthless cryptocurrency?
Venezuela starts pre-sale of Petro cryptocurrency

Venezuela's official currency, the bolívar fuerte, is in freefall.

Raising further doubts, Maduro has said that the undeveloped Orinoco oilfield will back the digital currency, creating no tangible barrels of oil that investors can cash in, said Jean Paul Leidenz, a senior economist at Caracas-based EcoAnalitica. The Venezuelan opposition says that is the result of years of under-investment and corruption.

Here is what we know about the new currency.

Mr. Maduro says his government is the victim of an economic war led by Opposition politicians with the help of the government of U.S. President Donald Trump.

"With the Venezuelan bolivar suffering from hyperinflation and the type of volatility usually reserved for the crypto markets, the petro appears to be an attempt to raise much-needed foreign capital".

CoinDesk highlighted some of the contradictory details regarding the token - while one documents talks about Ethereum network, another cites NEM blockchain.

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