Venezuela Launches El Petro Oil-Backed Cryptocurrency

Two months after Venezuelan President Nicolas Maduro surprised analysts and the cryptocurrency world with his idea to launch an oil-backed cryptocurrency, the socialist president said early on Tuesday that Venezuela had just launched its El Petro that would strengthen the country’s economy, while the U.S. mulls over oil sanctions, and the Venezuelan economy and its oil production continue to slide.

In early December, Maduro shocked analysts who follow both the country’s flirtations with default and the cryptocurrency community by announcing that Venezuela would 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.”

Last month, Maduro said that the 5 billion barrels of oil reserves at the Ayacucho block 1 in Venezuela’s Orinoco Belt would back the cryptocurrency.

The Petro, which Venezuela touts as the first cryptocurrency issued by a country, is now launching in pre-sale as a means to “boost monetary sovereignty”, while many analysts think it is just a desperate attempt to skirt U.S. financial sanctions. Analysts also think that the Petro won’t bring real benefits either to Venezuela’s ravaged economy or its people who suffer from shortage of basic necessities amid a hyperinflation expected at 13,000 percent this year by the IMF. Earlier this month, Colombia and Brazil tightened security along their Venezuelan borders as a growing number of desperate Venezuelans tried to flee from the worsening economic crisis to neighboring countries.

Venezuelan journalist, political scientist, and blogger Francisco Toro told CNBC in a recent interview that Venezuela had turned to the Petro cryptocurrency out of “desperation” because of the sanctions.

“They have been trying to figure out ways to get around anti-money laundering sanctions provisions, and crypto is maybe one way they can do that,” Toro told CNBC. 

Last month, U.S. Senators Marco Rubio (R-FL) and Bob Menendez (D-NJ) urged U.S. Treasury Department Secretary Steven Mnuchin “to outline the department’s enforcement mechanisms and efforts to combat the Maduro regime’s plans to use cryptocurrencies to evade U.S. sanctions.”

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“Maduro has proven that he will use every tool at his disposal to perpetuate his authoritarian objectives, including financial lifelines from Russia and China. As such, we are concerned that a cryptocurrency could provide Maduro a mechanism by which to make payments to foreign lenders and bondholders in the United States, actions that would clearly thwart the intent of U.S.-imposed sanctions,” the Senators wrote.

Meanwhile, Maduro said last week that Venezuela was going to shop around for other buyers of its crude oil, should the United States make good on its threat to impose an oil embargo. Maduro also claimed that oil production in Venezuela had increased by 250,000 bpd in January.

By Tsvetana Paraskova for Oilprice.com

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