In an effort to reinvigorate an economy crippled by socialism on one hand and US-led sanctions on the other, Venezuela established the Economic Recovery, Growth, and Prosperity Program, which resulted in the development of a state-supported cryptocurrency.
Venezuela’s Historic Day
Venezuelan President Nicolas Maduro expressed optimism in Petro and referred to Oct. 1 as the country’s historic date “born with its own technology, with its own effort in a free and independent country is the digital oil currency, the Petro.”
The President claimed that Petro is practical because it is backed by oil and mineral resources such as gold, diamond, aluminum, and iron. Petro will publicly go on sale on Nov. 5 and can be purchased using Bitcoin, Ether, American dollar, euro, and other currencies, including Venezuela’s own sovereign bolivar.
In a show of faith in Petro, the President mentioned that major international exchanges that sent representatives at the launch event are willing to take part in the usability and tradability of Petro. He said:
“The six major powerful exchanges in the world are here and will participate today in all the usability, tradability, and monetary work of the Petro.”
Venezuelan residents can buy a single Petro coin for 3,600. The government has mandated Petro to be a legal substitute for the country’s official currency and can be used for transactions ranging from groceries and services to real estate and international purchases.
Briefing media journalists, Foreign Minister Jorge Arreaza said that the cryptocurrency would “neutralize” black markets and money mafias that are widely blamed for weakening the bolivar and sending the country into deeper economic troubles.
Venezuela announced plans to develop Petro in late 2017 and claimed to have raised around $5 billion in its initial coin offering. The President also said the Petro presale attracted 83,000 individuals and 3,523 entrepreneurs from 127 countries.
Venezuela’s Shattered Economy
A report released by the International Monetary Fund (IMF) in June predicted that Venezuela’s hyperinflation would reach one million percent by the end of 2018 and compared the country’s situation to that of Germany in 1923.
The development of Petro was a way of addressing economic challenges resulting from hyperinflation. The country, however, stunned the world in May, when it banned the import of cryptocurrency mining equipment.
In August, Venezuela launched a new currency, the sovereign bolivar, after it had abandoned the bolivar currency, which was rendered useless by hyperinflation. Zimbabwe, another country that suffered from hyperinflation, abandoned its currency in 2009 and adopted a multi-currency system.
Venezuela is not alone in developing and issuing a cryptocurrency. Iran is developing its cryptocurrency after the US reimposed sanctions on the Islamic country. The collapse of fiat currencies has led to greater adoption of cryptocurrencies. Some have also claimed that Venezuela and Iran are embracing cryptocurrencies as a way of evading sanctions.