Opposition leaders have claimed that the petro is illegal, as the govt is effectively borrowing against the country’s untapped reserves, violating laws that require congressional approval for govt borrowing. while media pundits express concern over whether the investment is nothing more than a Ponzi scheme. Unlike other cryptos, each petro will allegedly be backed by a single barrel of Venezuelan oil. A total of 100 million petros will be available from launch, and the Venezuelan govt expects to raise 6 billion dollars.
“Petro is born and we are going to have a total success for the welfare of Venezuela,” said President Nicolas Maduro, according to teleSUR.
“The largest and most important companies and blockchain in the world are with Venezuela, we are going to sign agreements.”
US Senators Marco Rubio and Robert Menedez have denounced the cryptocurrency, stating in an open letter to U.S. Treasury Secretary Steven Mnuchin that “it is imperative that the U.S. Treasury Department is equipped with tools and enforcement mechanisms to combat the use of cryptocurrency to evade U.S. sanctions in general, and in this case in particular.” Perhaps Venezuela will be the excuse used to formally regulate cryptocurrencies, though their concern would suggest that cryptos remain a potent means for “rogue” nations to circumvent the almighty US sanction.
Harry Colvin, director and senior economist at Longview Economics noted that there were substantial risks to be had when investing in the currency.
“Venezuela has been known for misappropriation of assets in the past and the central bank has just created hyperinflation so I imagine there’ll be trust and transparency issues,” he said to CNBC. Should President Maduro lose the election in April, “then petros would probably be made illegitimate” altogether.
From the petro website:
“The petro will be the foundation of a policy to promote development, infrastructure and training of young people in electronic mining, coding, cryptography, network security and economics 4.0, that will enable the exploitation of Venezuela and other developing countries’ most valuable assets in a new world of transparent, deconcentrated and manipulation-free markets, all thanks to technology.”
Cambodia expected to follow Venezuela with plans for a national cryptocurrency
Cambodia is considering the development of its own national cryptocurrency after being inspired by the launch of the Venezuelan Petro in February.
The Cambodian crypto project would be named Entapay, and is expected to be proposed at a blockchain summit of Southeast Asian nations in its capital, Phnom Penh, on Wednesday, which will be attended by the country’s deputy prime minister, Men Sam An.
A press release issued ahead of the summit described Entapay ambitiously as “the connection between integration payment of encrypted currency and the real world. It has the great potential to even replace Visa as the new mainstream payment mode.”
It also referenced the creation of the Petro as a means to “assist the country in avoiding the Western world’s economic sanctions.”
Plans for Venezuela’s homegrown digital currency, backed by the government’s oil and natural resources, were first announced by President Nicolas Maduro in December, as a means to supplement the country’s plummeting bolivar fuerte.
Mr Maduro’s critics believe the move is designed to bypass US sanctions intended to pressure an authoritarian regime that has overseen food shortages and hyperinflation.
Venezuela has now joined Russia, Iran and North Korea in being accused of seeking to exploit the emerging popularity of cryptocurrencies which offer a new kind of financial infrastructure outside of the control of any central authority, particularly the US.
Experts have warned that a cryptocurrency, with its anonymity, loose regulations and ability to be converted into hard currency can be used to circumvent economic sanctions, which are usually enforced through regulatory and banking disclosure rules.
Digital currency transactions are recorded on a ledger known as the blockchain, which is maintained by independent computers rather than any central banking authority. This allows for buying and selling across borders with very little oversight.
A Cambodian cryptocurrency may be an attractive option for Hun Sen, the Cambodian prime minister, who faces the threat of international sanctions over his government’s crackdown on the political opposition, media and rights activists.
The White House announced last week that it would suspend several aid and military assistance programmes to authorities that it said shared the blame for political instability.
However, digital currencies are also being viewed as a way to boost national economies. Last week the Pacific island nation of the Marshall Islands became the first country in the world to recognise a cryptocurrency as legal tender.
The newly created digital “Sovereign” will have equal status with the US dollar as a form of payment.
Iran bans use of US dollar in trade
Tehran has announced that purchase orders by merchants that are based on US currency would no longer be allowed to go through import procedures.
According to local media, the policy is in line with an official request by the Central Bank of Iran (CBI) and is specifically meant to address fluctuations in market rates of the US dollar.
The CBI’s director of Foreign Exchange Rules and Policies Affairs, Mehdi Kasraeipour, was quoted by IRNA news agency as saying the move had become effective from Wednesday by virtue of a letter sent to the Ministry of Industry, Mines and Trade.
As part of a trade embargo, US banks are banned from dealing with Iran.
“Considering that the use of the dollar is banned for Iran and traders are literally using alternative currencies in their transactions, there is no longer any reason to proceed with invoices that use the dollar as the base rate,” Kasraeipour added.
According to the official, Iranian merchants would need to inform their suppliers to change the base currency from the dollar to other currencies so that the related import documents could be processed at Iran’s entry points.
Merchants will also need to specify whether they would proceed with their payments through banks or currency exchange shops.
While meeting with Russian President Vladimir Putin in November, Iranian Supreme Leader Ali Khamenei said that the best way to beat US sanctions against the two countries was joint efforts to dump the American currency in bilateral trade. He told President Putin that by using methods such as eliminating the US dollar and replacing it with national currencies in transactions between two or more parties, the sides could “isolate the Americans.”