Petro (cryptocurrency)

Petro
Petro logo
Denominations
Plural Petros
Ticker symbol PTR
Subunits
 ​1⁄100,000,000 Mene
Development
Original author(s)
White paper Petro White Paper
Initial release 20 February 2018 (2018-02-20)
Website www.petro.gob.ve
Block explorer registro.blockchain.gob.ve/web

The petro, or petromoneda,[2] launched in February 2018, is a cryptocurrency scheme developed by the government of Venezuela.[3][4] As of August 2018 it does not appear to function as a currency.[5]

Announced in December 2017, it is supposed to be backed by the country's oil and mineral reserves, and is intended to supplement Venezuela's plummeting bolívar fuerte currency, as a means of circumventing U.S. sanctions and accessing international financing.[6] On August 20, 2018 the bolívar soberano (Sovereign Bolivar) was introduced, with the government stating it would be linked to the petro coin value.[7][8]

History

Venezuelan President Nicolás Maduro announced the petro in a televised address on 3 December 2017, stating that it would be backed by Venezuela's reserves of oil, gasoline, gold, and diamonds.[9][10]

Maduro stated that the petro would allow Venezuela to "advance in issues of monetary sovereignty",[11] and that it would make "new forms of international financing" available to the country.[9] Opposition leaders, however, expressed doubt due to Venezuela's economic turmoil,[10] pointing to the falling value of the Venezuelan bolívar, its fiat currency, and $140 billion in foreign debt.[12]

On January 5, 2018, Maduro announced that Venezuela would issue 100 million tokens of the petro,[13] which would put the value of the entire issuance at just over $6 billion.[14] It also established a cryptocurrency government advisory group called VIBE to act as "an institutional, political and legal base" from which to launch the petro.[2] Carlos Vargas is the "Superintendent of Cryptocurrencies".[6]

Also in January, as a response to the petro, Venezuela’s National Assembly, headed by the opposition Democratic Unity Roundtable, declared the petro to be an illegal debt issuance by a government desperate for cash, and has said it will not recognize it.[15]

In a document leaked to and reviewed by Reuters, VIBE recommended that the government sell $2.3 billion worth of petros in a private offering at a discount of up to 60%, indicating that "Maduro’s valuation of the nascent petro faces significant market skepticism", followed by $2.7 billion worth of petros offered to the public a month later, with the remainder "shared between the government and VIBE". It also suggested that the government accept tax payments in petros as well as allow PDVSA, the country's state-owned oil company, incorporate cryptocurrencies in its dealings with foreign companies.[15]

Launch

The petro’s pre-sale started on February 20 at -04:00 UTC and ended on March 19 at -04:00 UTC.[16][17][4] 38.4 million tokens were made available.[18] The government stated the pre-sale raised US $3.3 billion,[18] though according to Steve Hanke no independent audits were made to verify this claim.[19]

The white paper of petro initially stated that the currency would be on the Ethereum platform, though later on the launch date the white paper was changed and the platform was to be with NEM.[20] Even after the launch, white papers in various languages still shared conflicting information as to which platform the petro was part of.[20] Due to the unorganized launch by the Venezuelan government, scammers were able to establish their own "petro" currencies on various cryptocurrency platforms, though these schemes did not garner much success.[20]

The second phase of the petro launch involves a public sale of 44 million tokens.[18]

Petro gold

On February 21, 2018, petro gold, a gold-backed cryptocurrency, was announced in a televised speech given by Venezuelan President Nicolás Maduro.[21] It was not clear whether the gold backing the tokens would be actual gold reserves or some kind of share of the country's untapped mineral wealth.[22][23]

Currency reform

In August 2018, the Maduro government carried out a currency reform, centered around replacing the old bolivar fuerte currency with the bolívar soberano.[24] One bolívar soberano is worth a hundred thousand bolivar fuerte. Under the country's fixed exchange rate to the US dollar the new currency is devalued by roughly 95% compared to the old bolivar fuerte.[25] Additionally, the new bolívar soberano has a fixed exchange rate to the petro, with a rate of 3,600 bolívares soberanos to one petro. The petro's fixed exchange to barrels of oil is one to one (the market value was approximately US $60 at the time of the reforms). As part of the reforms Venezuelans will be paid at least 0.5 petros a month.[18][26][27]

Following the reform, Reuters investigated the petro six months after its ICO. When visiting the Venezuelan Ministry of Finance headquarters in Caracas, the Superintendent of Cryptocurrencies did not have an office there and their promoted website did not exist.[5] The Atapirire parish, where President Maduro specifically decreed the petro's value would be linked to oil reserves in the area, has seen no petroleum-related activities and the oil rigs in the area appeared small, old and abandoned.[5] Experts in economics stated that it was impossible to link the petro to the bolívar soberano because no one knows its legitimate value.[5] Though "reservations" were sold by the Venezuelan government to obtain petros, no petros had been released by the Venezuelan government.[5]

Design

The petro was a token based on the NEM blockchain. The design of the petro by the Venezuelan government has been controversial, with white paper changing by the day even after the petro's pre-sale.[28] Petros are "pre-mined" by the Venezuelan government, meaning that new tokens cannot be created after the issuance.[6][28] Members of the Venezuelan Ministry of University Education, Science and Technology allegedly under advisory of the Russian government designed the petro to circumvent United States sanctions, with Russian president Vladimir Putin devising official involvement.[1] On Oct 1 2018, the cryptocurrency switched to an X11 algorithm-based design.[29][30]

Transactions

During the ICO petros could only be purchased from the Venezuelan government with Russian rubles, Bitcoin, NEM and Ethereum.[31] The minimum required investment to acquire the crypto-asset is 50 euros (or its equivalent) per digital wallet or 1000 euros (or its equivalent) per bank deposits.[32]

Venezuela legally allows and encourages the use of petro for virtually any payment including oil trade, taxes, fees, real estate, gasoline, flights and more.[33][34][35]

Price and volatility

Weiss Cryptocurrency Ratings states that the white paper shows no method as to how the Venezuelan government will base the petro on oil prices, concluding that the currency "is a worthless token".[36] But according to the white paper, the base price of the petro is equivalent to the price of a single Venezuelan oil barrel: 1 petro = 1 oil barrel. The official Venezuelan oil price is defined by the Venezuelan Ministry of Oil and Mining and the current price of the petro (during the ICO) is referenced on its web page.[37]

According to the official white paper, national and international licensed exchanges will be able to sell and exchange the petro, allowing the market to define its price.[38] While there is no mechanism to exchange petros for any other currency yet, the government is expected to back each petro with the value of one oil barrel obtained specifically from the Atapirire parish of Anzoátegui to be exchanged into bolivares or other currencies.[5][39] However, President Maduro has made contradictory statements saying that the petro's worth may be determined solely by market value.[40]

Reception

United States

The United States Department of the Treasury warned that participating in Venezuela's proposed initial coin offering for the petro cryptocurrency could violate U.S. sanctions against Venezuela, because it "would appear to be an extension of credit to the Venezuelan government".[15] President Donald Trump signed an executive order prohibiting transactions in any Venezuelan government-issued cryptocurrency by a United States person or within the United States, effective 19 March 2018.[41][42]

On 19 March 2018 President Trump prohibited Americans from investing in the petro, claiming it was designed to obfuscate US sanctions and access international financing.[43][44]

Others

The Brookings Institution stated that "it is relatively unsurprising that a dictatorship with little reserve currency ... has resorted to a deceitful means like introducing the petro ... [t]he petro ... exists to create foreign currency reserves from thin air", further explaining that the creation of the petro has tarnished the reputation of cryptocurrencies and that sanctioned countries "might pursue the same fraudulent strategy as Venezuela: create a cryptocurrency tied to a government-controlled asset, raise money in violation of sanctions, and proceed to manipulate that cryptocurrency’s value to maximize profit".[31]

Financial

The cryptocurrency community's response was generally negative. Economist Jean Paul Leidenz expressed concerns that the creation of the petro would encourage further hyperinflation.[2] Economist Steve Hanke, who studies hyperinflation in Venezuela, stated that the petro was likely to wind up "in the graveyard",[45] later saying the petro "It doesn’t exist. The whole thing is a sham, a fraud. It was rolled out in January, and it doesn’t trade. It is not considered by those who rate cryptocurrencies as even a cryptocurrency."[19] Other analysts point to its government control or centralisation as its greatest weakness.[46] Financial journalist Max Keiser expressed his support in light of the country's hyperinflation.[47]

According to Bloomberg, the organizations that rank cryptocurrencies have described the petro as a "scam", with sites like ICOindex, ICObench, Cryptorated and ICOreview giving negative reviews or not even rating the petro due to its status.[48] Initially, from its white paper which was released in January, petro was missing some important information regarding its mechanism to its technology. After a couple of weeks, a new version of the white paper was released which announced a different blockchain platform on which petro would be built.[49]

Investment

The Washington Post economic reporter Matt O'Brien said that "The petro might be the most obviously horrible investment ever... The petro is about creating something useless — that's why only foreigners can buy them, but only Venezuelans can spend them".[28]

See also

References

  1. 1 2 Shuster, Simon (20 March 2018). "Exclusive: Russia Secretly Helped Venezuela Launch a Cryptocurrency to Evade U.S. Sanctions". Time. Retrieved 2018-03-22.
  2. 1 2 3 Chappell, Bill (4 December 2017). "Venezuela Will Create New 'Petro' Cryptocurrency, President Maduro Says". National Public Radio. Retrieved 2017-12-05.
  3. ↑ Cryptocurrencies as Asset-Backed Instruments: The Venezuelan Petro. Banking and Insurance eJournal. Social Science Research Network (SSRN). Accessed 18 February 2018.
  4. 1 2 (20 February 2018). Venezuela launches the ‘petro,’ its cryptocurrency. Retrieved 3 March 2018.
  5. 1 2 3 4 5 6 Ellsworth, Brian (30 August 2018). "Special Report: In Venezuela, new cryptocurrency is nowhere to be found". Reuters. Retrieved 30 August 2018. The coin is not sold on any major cryptocurrency exchange. No shops are known to accept it.
  6. 1 2 3 Helms, Kevin (17 January 2018). "Venezuela Considers Selling Its "Oil-Backed" Cryptocurrency With a 60% Discount". Bitcoin News. Retrieved 8 February 2018.
  7. ↑ Venezuela 'paralysed' by launch of sovereign bolivar currency, BBC News, August 21, 2018
  8. ↑ "Venezuela rolls out new currency amid rampant hyperinflation". www.aljazeera.com.
  9. 1 2 "Venezuela Plans a Cryptocurrency, Maduro Says". The New York Times. 3 December 2017. Retrieved 2017-12-03.
  10. 1 2 Ulmer, Alexandra; Deisy Buitrago (3 December 2017). "Enter the 'petro': Venezuela to launch oil-backed cryptocurrency". Reuters. Retrieved 2017-12-03.
  11. ↑ "Monetary Sovereignty: International Political Economy: Monetary Relations eJournal", Cryptoanarchism and Cryptocurrencies. Social Science Research Network (SSRN). Date accessed 23 January 2018.
  12. ↑ "Venezuela unveils virtual currency amid economic crisis". BBC. 3 December 2017. Retrieved 2017-12-03.
  13. ↑ Gupta, Girish (5 January 2018). "Maduro says Venezuela will issue $5.9 billion in oil-backed cryptocurrency". Reuters. Retrieved 8 February 2018.
  14. ↑ "Venezuela Parliament Calls President's $5.9 bln Petro Cryptocurrency 'New Fraud'". Cointelegraph. 10 January 2018.
  15. 1 2 3 Wroughton, Lesley (16 January 2018). "U.S. warns investors over Venezuela's 'petro' cryptocurrency". Reuters. Retrieved 8 February 2018.
  16. ↑ "Venezuela's Cryptocurrency Petro Finds Foreign Investors, ICO To Take Place In March". Cointelegraph. 8 February 2018.
  17. ↑ Gallas, Daniel (January 30, 2018). "Venezuela presses ahead with Petro". BBC. Archived from the original on February 20, 2018. Retrieved February 20, 2018. Venezuela is to start selling its cryptocurrency “Petro” next month. In a meeting with cabinet ministers, President Nicolas Maduro (above) said it will launch the currency on 20 February.
  18. 1 2 3 4 "Terms of Service Violation". www.bloomberg.com.
  19. 1 2 Mak, Aaron (22 August 2018). "Venezuela Is About to Become the First Country to Peg Its Currency to a Cryptocurrency. Don't Believe the Hype". Slate Magazine. Retrieved 23 August 2018.
  20. 1 2 3 "Venezuela's 'Petro' Launch Was Amateur Hour". Vice News. 2018-02-21. Retrieved 2018-03-06.
  21. ↑ Venezuela to Launch Second Cryptocurrency: 'Petro Gold', Caracas: teleSUR, 22 February 2018, retrieved 2018-02-23
  22. ↑ Brian Ellsworth, Ana Isabel Martinez (February 21, 2018), Venezuela aims for crypto alchemy with new 'petro gold' token, Reuters
  23. ↑ David Gilbert (February 22, 2018), "Venezuela is launching yet another cryptocurrency to save the economy", Vice News
  24. ↑ "With 1,000,000% inflation, Venezuela slashes five zeroes from its bills".
  25. ↑ Hopps, Kat (21 August 2018). "Venezuela crisis: How much is the bolivar worth today? Bs to USD to GBP".
  26. ↑ Phillips, Tom (20 August 2018). "Venezuela devalues currency and raises minimum wage by 3,000%". the Guardian.
  27. ↑ "Venezuelans to Be Paid at Least Half a Petro a Month - Bitcoin News". 18 August 2018.
  28. 1 2 3 O'Brien, Matt (2018-03-05). "Venezuela's cryptocurrency is one of the worst investments ever". Washington Post. ISSN 0190-8286. Retrieved 2018-03-06.
  29. ↑ https://www.criptonoticias.com/infraestructura/petro-ahora-utilizara-consenso-hibrido-algoritmo-x11/
  30. ↑ www.elpetro.gob.ve/index_eng.html
  31. 1 2 West, Jack Karsten and Darrell M. (2018-03-09). "Venezuela's "petro" undermines other cryptocurrencies – and international sanctions". Brookings Institute. Retrieved 2018-03-12.
  32. ↑ "Petro Divisa on Twitter".
  33. ↑ "Venezuela launches presale of state-backed 'petro' cryptocurrency". Financial Times. 2018-02-20. Retrieved 2018-04-19.
  34. ↑ "Venezuelans to Buy Homes and Property with State Cryptocurrency - Bitcoin News". Bitcoin News. 2018-03-25. Retrieved 2018-04-18.
  35. ↑ "Venezuelan President Orders Airlines to Accept Petro, Cryptocurrencies for Tickets". CCN. 2018-03-02. Retrieved 2018-04-18.
  36. ↑ "Bittersweet Story of the Petro". Weiss Cryptocurrency Ratings. Weiss Ratings. 28 February 2018. Retrieved 6 March 2018.
  37. ↑ Ministerio del Poder Popular de Petróleo y Minería, http://www.minpet.gob.ve/
  38. ↑ "Venezuela May Limit New Crypto Exchange Launches - CoinDesk". CoinDesk. 2018-02-26. Retrieved 2018-04-18.
  39. ↑ Browne, Ryan (2018-02-21). "Venezuela's oil-backed cryptocurrency raised $735 million in one day, president claims". CNBC. Retrieved 2018-04-19.
  40. ↑ "¡Confuso! Maduro asegura que ajustará el precio del petro cada seis meses". La Patilla (in Spanish). 2018-09-07. Retrieved 2018-09-08.
  41. ↑ "Executive Order on Taking Additional Steps to Address the Situation in Venezuela". The White House. 19 March 2019.
  42. ↑ Lee, Matthew (19 March 2019). "Trump Bans US Use of Venezuelan Cryptocurrency". U.S. News & World Report
  43. ↑ "World's First National Oil-Backed Crypto Becomes Venezuela's Official Currency - The Daily Hodl". dailyhodl.com.
  44. ↑ "Donald Trump has banned all American use of Venezuelan cryptocurrencies".
  45. ↑ Hanke, Steve (6 December 2017). "Maduro's 'Petro' Cryptocurrency Will Join Chavez's Bolívar Fuerte, In The Graveyard". Forbes. New York. Retrieved 2017-12-11.
  46. ↑ Jon Markman (2 February 2018). "Trading Lesson: New Government Coins Pose Existential Threat to Cryptos". MoneyShow. MoneyShow.com. Retrieved 3 March 2018.
  47. ↑ Adams, Colin (14 December 2017). "Meet the "Petro", Venezuela's New "Cryptocurrency"". Invest in Blockchain. Retrieved 8 February 2018.
  48. ↑ "Crypto Rating Sites Are Already Calling Venezuela's Petro a Scam". Bloomberg. 2018-04-03. Retrieved 2018-04-05.
  49. ↑ "Crypto Investors Should Stay Away from Venezuela's Petro - CoinDesk". CoinDesk. 2018-03-25. Retrieved 2018-04-05.
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