Venezuela is getting ready to launch within days its own cryptocurrency--El Petro--which will be backed by more than 5.3 billion barrels of oil and support $267 billion worth of financial instruments, Venezuela's Communications Minister Jorge RodrÃguez said on Thursday.
Earlier this month, Venezuela's President Nicolas Maduro shocked both analysts who follow the country's flirting with default and the cryptocurrency community by announcing that Venezuela wanted to launch the petro cryptocurrency, backed by oil, diamonds and gold reserves, to help the country to "advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade."
Earlier this week, Maduro said that the 5 billion barrels of oil reserves at the Ayacucho block 1 in Venezuela's Orinoco Belt will back the cryptocurrency, according to a press release posted on the website of state oil firm PDVSA.
According to Communications Minister RodrÃguez, the petro cryptocurrency will comply with all mechanism of the other cryptocurrencies, but the difference will be that Venezuela's digital currency will be backed by hard assets, namely oil wealth.
Venezuela's claim that the petro will be backed by assets worth $267 billion compares to the current market capitalization of the most popular cryptocurrency, Bitcoin, which stood at $241 billion early on Friday. Related: What Drove WTI Above $60?
Venezuela's oil-backed cryptocurrency is not the only one in the works.
Earlier in December, a team of banking and technology managers and former U.S. regulatory commissioners said that they would launch the world's first regulatory compliant cryptocurrency backed by a physical asset-OilCoin, which will be based on oil reserves. OilCoin's public token sale, also known as the initial coin offering (ICO), is expected to begin in January 2018. The aim of the OilCoin is to tokenize barrels of oil, where each token will represent the value of one barrel, and provide users with a meaningful safe haven from cryptocurrency volatility, the team launching the digital currency said.
By Tsvetana Paraskova for Oilprice.com
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Comments
Since it came into existence in 1973, the US petrodollar has provided three immediate benefits to the United States. It has increased global demand for US dollars. It has also increased global demand for US debt securities and it has given the United States the ability to buy oil with a currency it can print at will.
By launching its petro-yuan, China hopes to replicate this dynamic. A rising China is eyeing the benefits of having its own currency play a larger role and supplant the petrodollar in global trade. The initial focus of that trade is oil trade. Moving oil trade out of the petrodollar into the petro-yuan will take initially between $600 billion and $800 billion worth of transactions out of the petrodollar.
The eventual launching of Russia’s crypto-rube also aims at deepening Russia’s tools to combat US sanctions. Russia has been retaliating against US sanctions by settling
more oil contracts in the Chinese yuan and other Asian currencies. This can facilitate a shift in the oil supply chain economy away from banks sanctioned by the US and spur development in that space across not only Russia, but the entire region served by the Eurasian Economic Union.
By planning to launch El Petro, Venezuela is following Russia’s example.
The US continues to sanction and threaten all of these countries for daring to challenge the global status quo. US foreign policy defends the petrodollar to maintain its control over the global oil trade which is a huge chunk of the global economy..
In June 22, 2015 the United States Association for Energy Economics published a research paper for me titled:” Has the Petrodollar Had Its Day?” in which I concluded that the petrodollar has had its day and that it will be a matter of time before it becomes redundant with huge repercussions for the US economy.
This is starting to happen. The launching of the crude oil benchmark on the Shanghai exchange along with the proposed launching of Russia’s and Venzuela’s cryptocurrencies could mark the beginning of the end of the petrodollar.
Since it came into existence in 1973, the US petrodollar has provided three immediate benefits to the United States. It has increased global demand for US dollars. It has also increased global demand for US debt securities and it has given the United States the ability to buy oil with a currency it can print at will.
By launching its petro-yuan, China hopes to replicate this dynamic. A rising China is eyeing the benefits of having its own currency play a larger role and supplant the petrodollar in global trade. The initial focus of that trade is oil trade. Moving oil trade out of the petrodollar into the petro-yuan will take initially between $600 billion and $800 billion worth of transactions out of the petrodollar.
The eventual launching of Russia’s crypto-rube also aims at deepening Russia’s tools to combat US sanctions. Russia has been retaliating against US sanctions by settling
more oil contracts in the Chinese yuan and other Asian currencies. This can facilitate a shift in the oil supply chain economy away from banks sanctioned by the US and spur development in that space across not only Russia, but the entire region served by the Eurasian Economic Union.
By planning to launch El Petro, Venezuela is following Russia’s example.
The US continues to sanction and threaten all of these countries for daring to challenge the global status quo. US foreign policy defends the petrodollar to maintain its control over the global oil trade which is a huge chunk of the global economy.
In June 22, 2015 the United States Association of Energy Economics published a research paper for me titled:” Has the Petrodollar Had Its Day?” in which I concluded that the petrodollar has had its day and that it will be a matter of time before it becomes redundant with huge repercussions for the US economy.
This is starting to happen. The launching of the crude oil benchmark on the Shanghai exchange along with the proposed launching of Russia’s and Venzuela’s cryptocurrencies could mark the beginning of the end of the petrodollar.
Dr Mamdouh G Saameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London