The whole purpose of Bitcoin when it was announced in 2008 is to create a currency that isn’t tied to one economy. It was actually an answer to the 2008 financial crisis. Fast forward 10 years later, it seems that cryptocurrency is also going to be used in order to prevent further economic problems but this time around for Venezuela.
Pre-Sale of Petro
Venezuela recently launched the pre-sale of its national cryptocurrency, the Petro. This is an Ethereum-based token that is similar to other tokens that run on the Ethereum network.
But unlike other cryptocurrencies that aren’t backed by any commodity, Petro is going to be backed by the nation’s oil reserves. For its critics, they see it as a form of a national debt more than a currency. It is a bold debut for Petro since a lot of countries today are wary of cryptocurrencies. But unlike other countries, Venezuela embraced the possibilities brought by blockchain technology.
The Venezuelan Petro token will be backed by different commodities such as oil, gas, gold, and diamond reserves according to reports. The cryptocurrency will be getting investments from Qatar, Turkey as well as other Middle Eastern countries.
Is It a Cash Grab ICO?
The Petro has been made mainly because of the collapse of Venezuela’s hard currency as the country faced hyperinflation. There are those critics saying that the digital currency will not bring any difference to Venezuela’s economy or its people who are already dealing with a shortage of basic supplies from food to medicine.
There are those who are looking at Petro as a sketchy cash grab ICO. Knowing the economy of Venezuela, many are hesitant whether or not to invest in this opportunity.
Warwick Business School professor Daniele Bianchi mentioned that “There is no reason why a rational investor should put money into it”. In addition to this, “The country is fighting quadruple digit inflation with crude oil production down about 29 percent in 2017. Venezuela is arguably defaulting on its debts, and unless one really believes that this is merely due to outside financial sanctions, there is no reason why this could not happen with the Petro as well”.
The Petro is also seen by Venezuela to be able to circumvent both US and European sanctions. Both US and European sanctions haven’t helped the country in terms of its inflation. Petro seems to be the biggest ICO to date. With the hopes to raise over $5 billion, this could potentially make up to the 5% of all Ethereum in circulation if the capital has been reached.
There is so much debate with Petro. Francisco Toro, who is a Venezuelan journalist and blogger mentioned that it’s simply an act of desperation because of Venezuela’s economic isolation from the US. Also, “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”.
Should you invest in Petro? Can it really become a great investment that can make a huge impact on the already dwindling economy of Venezuela?