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Venezuelan President Nicolas Maduro suggested the creation of a national cryptocurrency in 2017. Officials claim that the country’s oil, gas, and mineral riches back its value. However, as of today, Petro seems to fail fulfilling its purpose of rescuing the national economy.
This article will provide an analysis of the creation of this national cryptocurrency. Furthermore, we will look at the market reaction, trying to understand its future.
Getting to know the “Petrodollar” concept
The Venezuelan economy largely relies on oil exports. If we were to convert this statement into numbers, we could point out the following statistics:
- 95% of exports consist of oil and oil-related products
- overall, the oil business represents roughly 25% of the national GDP.
Petrodollars are U.S. Dollars that governments pay to import oil from abroad. The “Petrodollar” name first appeared during the oil crisis of the mid-1970s. At the time, oil prices reached historic highs, making the topic particularly popular on the news.
Petrodollars originally referred to money received by Middle Eastern countries and OPEC members. However, we often see in the news the association of other oil exporters with this concept.
From Petrodollars to $PTR
At the end of 2017, Venezuelan President Nicolás Maduro unveiled the Petro ($PTR) in a televised address. Maduro promised that Venezuela’s oil, gasoline, diamond, and gold reserves would back the cryptocurrency’s value.
The Petro, according to Maduro, would let Venezuela progress in matters of monetary sovereignty. The general idea was that $PTR would create new foreign finance access to the country.
At the beginning of 2018, Maduro declared that Venezuela would issue 100 million $PTR tokens. In monetary terms, this decision corresponded to $5.9 billion.
Venezuela’s National Assembly, led by the opposition Democratic Unity Roundtable, proclaimed the petro to be an illegal debt issuance by a government desperate for cash in January and has stated that it would not recognize it.
The National Assembly, led by the opposition party, refused to recognize $PTR as a national digital currency. To summarize this political position, Maduro’s opposition saw Petro as an illegal debt issuance tool.
The debut on the market
The pre-sale for $PTR began in February 2018 and ended one month later. The operation led to the allocation of $3.3 billion.
At first, no one really knew much about the technological framework of $PTR. The original whitepaper of the project mentioned an imminent launch on Ethereum, but its creators changed their minds later.
The issue was that the current structure of the paper is suspiciously too stable for the market. Joey Zhou, an $ETH developer, publicly claimed that the project resulted in a clone of the Dash cryptocurrency.
How did the market react to $PTR?
Maduro probably hoped for a better debut of $PTR on the market. We could mention a long list of economists skeptical against the concept, fearing even stronger hyperinflation.
The government apparently took an existing cryptocurrency (Dash), cloned its concept, and made it centralized. Some commentators claim that the centralization of $PTR is among its primary weaknesses.
Any crypto pundits know that the market offers several independent services to evaluate a blockchain project. If we look at ICObench, for example, $PTR only scores 1.6 on 5. Other websites do not even provide a review for lack of independent assessments.
Despite the cold welcome, Maduro has been pushing Petro. He declared, in 2020, that planes traveling from Caracas would have to pay for gasoline in $PTR. This move may artificially increase Petro’s usage.
Furthermore, there is a popular rumor that Russian authorities may have helped Maduro design $PTR to avoid sanctions. These sorts of allegations certainly do not help the project gain popularity among international investors.
The government aims to increase the adoption of $PTR by imposing several professional categories to use it. There are various uncertainties concerning the successful implementation and development of this cryptocurrency.
So far, it appears to be a monetary strategy based on trial and error to replace the Bolivar. There is no denying that it will also help withstand US economic and financial sanctions. However, the path to replacing the national currency may be a long and complex one.