Venezuela’s new cryptocurrency – a return to the gold standard

On February 20th, the President of Venezuela presented a new national cryptocurrency “petro”. It is expected that its total capitalization will exceed six billion dollars and will help the country to come out of the crisis – informs “Investor”.

An introduction of cryptocurrencies is intended to help the country overcome a deep crisis, while the official currency of the country, the bolivar, is experiencing hyperinflation. According to the latest data, 1 US dollar costs about 29 thousand bolivars.

The opposition has criticized the idea introduced by President Maduro. According to critics, the authorities are using it to illegally create new debts.

The name of the cryptocurrency is derived from the word petroleum (“gasoline” in English) because it must be supported by Venezuelan oil. One “petro” should be supported with one barrel of oil. The minimum unit is called “mene”. Consequently, if the value of the cryptocurrency is reduced its owners will theoretically retain the right to the corresponding amount of oil. However, it is still not known how this will work. The cost of one “petro” is currently about 60 US dollars, which is roughly equal to the cost of one barrel of crude oil on world markets.

The idea of introducing cryptocurrency was very well received by the officials and the next step has already been announced: after “petro”, which is supported by oil, there will be another “petro” cryptocurrency supported by gold:

“I consider this an interesting start. There’s hope that within the framework of the system there will be a currency more stable than, for example, bitcoin or other currencies,”

said the representative of the Frankfurt School of Finance and Management Philipp Sandner.

The new currency is interesting due to its dissimilarity with similar currencies. An idea of the inventor of the first bitcoin cryptocurrency was to create a payment system that would be protected from forgery and independent from state institutions. “Petro” should be protected from forgery, like other blockchain cryptocurrencies, but at the same time, it will not be independent from the state.

100 million coins will be issued. Their initial distribution is planned as follows: 38.4% – pre-order; 44% – public sales; 17.6% will be kept at the disposal of the Venezuelan Commission on Crypto Culture.

The experiment of Venezuela causes ambiguous responses of specialists. The responses range from extremely negative to optimistic. Some see it as Maduro’s attempt to lead the country out of the crisis, and others as the future of an entire world monetary system, a new utopia of returning to the times of the gold standard.