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Is Cryptocurrency El Petro a Lifeline Or An Empty Hype For Venezuela?

Venezuelan El Petro

This week the news that Venezuela raised $ 735 million on the first day of presale of the national cryptocurrency El Petro grab the headlines.

Really, this event can be considered extraordinary, and there is a number of reasons:

  1. This is second-large presale in the history of cryptocurrency. The first place has Pavel Durov with his ICO Messenger Telegram ($ 850 million);
  2. The El Petro tokens were issued contrary to the decision of the country's parliament to escape sanctions and economic isolation;
  3. It is not completely clear which platform was used to issue tokens - Ethereum (as indicated in the whitepaper of the project) or NEM (referred to in the guide for investors on the El Petro website);
  4. Despite the shaky reputation of Nicolas Maduro the project still attracted considerable investors attention from different countries.

The History Of El Petro Creation

For the first time, El Petro became aware of plans to launch an "oil-backed" digital currency in mid-October last year. Venezuelan Central Bank has stated that the measure is compelled and it is caused by a "insuperable" hyperinflation.

At the beginning of December, 2017 Maduro said that the oil-backed cryptocurrency created to help the country to pass to "new forms of the international financing". A month after the official announcement, the  Latin American authorities began preparing everything needed to launch the "digital money of a new generation".

So, according to Maduro, more than 860 thousand miners (nearly 3% of the population) have become interested in El Petro, and their number continues to grow.

According to various media, Maduro decided to "reinforce" 100 million El Petro tokens with 5.3 billion barrels of crude oil (about $ 267 billion) from the Ayacucho in one of the Orinoco River basin. Tthe price of one barrel of crude oil traded around $60 will become the basis for determination of the El Petro price.

After the presale, it became known that Venezuela's President Nicolas Maduro has ordered several state-owned companies to convert a percentage of their sales and purchases into the El Petro cryptocurrency.

Populism or common sense?

On the first day of the presale, the Venezuelan President published a number of tweets about his success.

On Thursday, February 22, Nicholas Maduro said that foreign investors' interest in transactions with "oil-backed" Venezuelan cryptocurrency has already exceeded one billion dollars.

"Today, a cryptocurrency is being born that can take on Superman," the Venezuelan president said.

Also Maduro said that only about 292 thousand investors took part in the pre-sale. At the same time, 36% of transactions have made in US dollars, 15% - in euro, 18% - in Ethereum, and 31% - in Bitcoin.

We will note that it is the first initiative of revival of the economy staying on the verge of a collapse has faced sharp criticism both from various representatives of the authorities and many participants of cryptocommunity.

As mentioned earlier, the Venezuelan parliament unanimously voted against the release of this digital asset.

This is not a cryptocurrency, this is a forward sale of Venezuelan oil,” saidlegislator Jorge Millan. “It is tailor-made for corruption.”

Reasons for doubts

It is disturbing that the initiator of the project is Maduro and his party, associated with corruption, widespread violation of human rights and terrible hyperinflation.

Researcher Michaela fry expressed confidence that the El Petro project is only intended to create the appearance of democracy. In fact, according to fry, this digital currency is designed to support the dictatorial regime and the ubiquitous "big Brother".

If to sum up all aforesaid, it will be curious to watch the development of Venezuela economy experiment. At the same time doesn't leave a thought and that the centralized cryptocurrency operated by the state, at least in such execution, not the most successful today the idea.