Venezuela’s president will ask OPEC members and oil producing non-members to back Petro, an ethereum token issued by Venezuela’s government.
According to Venezuelan state radio, Nicolas Maduro, Venezuela’s controversial current president, said in a statement:
“I am going to officially propose to all OPEC and non-OPEC producing countries that we adopt a joint cryptocurrency mechanism backed by oil.”
Venezuela has allocated five billion oil barrels to back Petro, a crypto-token that will be tied to the price of a barrel of Venezuelan oil.
With the Petro token to be created in an Initial Coin Offering (ICO) which hopes to raise $5 billion, with half of it going to a state fund.
The Venezuelan government has pledged to promote Petro by launching an international campaign focusing on Venezuela’s allies and developing countries.
The United States has placed sanctions on Venezuela for human rights abuses, with a US Treasury spokesman stating such sanctions could apply to the token purchasers:
“The petro digital currency would appear to be an extension of credit to the Venezuelan government … [and] could, therefore, expose US persons to legal risk.”
However, the United States currently trades with Venezuela on oil, which does not seem to be part of the sanctions. It is unclear, therefore, whether the token purchase could be considered as an indirect way of purchasing oil or betting on oil.
Nor is it clear how long this token would remain backed by oil as Venezuela’s opposition has stated it could be unconstitutional.
Moreover, the ethereum network can probably not currently handle the level of transactions demand that would be required for the token to operate as a currency at a country level.
But in a nation plunged into poverty due to hyperinflation, desperation might be leading them to try anything.
And perhaps once they find out such token can easily be converted into decentralized currencies, they might be better able to withstand any volatile movements in their national currencies or tokens.