In response to decentralized cryptocurrencies like Bitcoin, Venezuela has become the first country to officially introduce a government-backed cryptocurrrency. Known as Petro, this blockchain-based currency is pegged against the oil reserves of the South-American nation.
Venezuela's President Nicolás Maduro formally launched the new oil-backed cryptocurrency as an effort to pull the country out of an ever-increasing economic crisis, and easing its USD 141 billion foreign debt. According to the Caracas government, this coin is a legal tender that can be used to pay taxes, fees and other public services.
The cryptocurrency has so far received tremendous response from investors. It was able to amass about USD 735 million during the pre-sale. The maximum supply of the Petro coins is set at 100 million, with about 38.4 million units going for the pre-sale and 44 million to be sold during the initial coin offering beginning on March 20 this year, says Petro's whitepaper. During the sales, each Petro unit cost at 60 USD to the investors, based on the price of a barrel of Venezuelan crude oil in mid-January.
While, the initial funding to the coin has been successful, the US treasury released a warning to its investors to stay away from the coin, saying buying Petro would mean a direct violation of the sanctions. This stance on Petro is an extension of the ongoing US and European sanctions against Venezuela, which for many years has caused damage to the Venezuelan economy.
The country is going through serious hyperinflation and concerns related to the manipulation of the price of Petro are also high. International Monetary Fund predicts inflation rate of 13,000 per cent for the Venezuelan economy in 2018, with GDP further contracting by about 15 percent during the year. Following the sale of the Petro, Maduro says that he plans to launch another cryptocurrency backed by gold in future.