The US Treasury Department raised their concern on potential American investors that are planning to own the new Venezuelan cryptocurrency, Petro. According to the US Treasury Department, owning Petro can be considered a violation of sanctions imposed against the country.
According to the agency’s spokesman, “Available information indicates that, once issued, the Petro digital currency would appear to be an extension of credit to the Venezuelan government”. He also added that Petro could “expose US persons to legal risks”.
Cryptocurrency Backed by Oil
Venezuelan President Nicolas Maduro announced that the new digital currency, Petro will be backed by barrels of crude oil produced by the country. Each of the 100 million coins, backed by oil can even beat Bitcoin in terms of market capitalization.
Venezuelan President Maduro even invited members of the Bolivarian Alliance for the Peoples of Our America-Peoples Trade Treaty to join in this venture. It was reported in Bloomberg that Petro will be accepted as a form of payment for fees and taxes in the country. The cryptocurrency will also be used by the Caracas for international transactions.
The expected market capitalization of the said digital currency is going to net up to $1.3 billion. Also, about 38 million petros are going to be expected to be sold on its presale by February 15.
Meant Against Financial Blockade
Why design Petro in the first place? The country designed the cryptocurrency in order to overcome financial blockade.
Venezuelan economist and journalist Tony Boza mentioned that “Venezuela will always possess the resources that will back Petro. This would allow the country to obtain financial independence which cannot be provided by the bolivar as it is bound to the US dollar”
Since Petro is going to be bound not only to oil but also to other commodities such as gold and diamonds, there is a possibility that it can impact Venezuela’s economy on a positive note.
According to Jorge Rodiguez, the country’s Communications and Information Minister, he pointed that the cryptocurrency will allow the exchange of goods without the involvement of any financial institution just like how the blockchain technology works.
However, he mentioned that “it is unclear what the possible involvement of the Venezuelan government or the central bank would look like. It is unknown whether the government would be able to adjust the mechanism and criteria of its issuance”.
Struggling out of Debt
Venezuela has been known to struggle economically after Hugo Chavez’s regime. It has been struggling mainly with sanctions and is struggling to restructure debts.
The Venezuelan government announced the plan in order to increase the flow of investment into the country.
The petro is planned to be used as the payment tool that foreign partners are going to use. However, there could be a concern. Will it be recognized by other countries? What’s the use of a cryptocurrency that you can’t exchange for fiat money?
Given the latest development and warning on American investors, do you think that petro can help Venezuela in the coming months? Will their central bank really be hands-off when it comes to this cryptocurrency?