The ''petro'' (₽), or ''petromoneda'',
launched in February 2018, was a
crypto token issued by the government of
Venezuela
Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and many Federal Dependencies of Venezuela, islands and islets in the Caribbean Sea. It com ...
.
Announced in December 2017, it was supposed to be backed by the country's
oil
An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) and lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturate ...
and
mineral reserves, and was intended to supplement Venezuela's plummeting
''hard bolívar'' currency, as a means of circumventing
U.S.
The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 states and a federal capital district, Washington, D.C. The 48 contiguous ...
sanctions and accessing international financing. On 20 August 2018, the
''sovereign bolívar'' was introduced, with the government stating it would be linked to the petro coin value.
As of January, 2020, Venezuelan president
Nicolás Maduro
Nicolás Maduro Moros (; born 23 November 1962) is a Venezuelan politician and former union leader serving as the 53rd president of Venezuela since 2013. Previously, he was the 24th Vice President of Venezuela, vice president from 2012 to 20 ...
decreed it mandatory to pay with petro for government document services and airplane fuel for planes flying international flights.
On January 15, 2024, the token was shut down and any remaining holdings were liquidated.
History
Venezuelan president
Nicolás Maduro
Nicolás Maduro Moros (; born 23 November 1962) is a Venezuelan politician and former union leader serving as the 53rd president of Venezuela since 2013. Previously, he was the 24th Vice President of Venezuela, vice president from 2012 to 20 ...
announced the petro in a televised address on 3 December 2017, stating that it would be backed by Venezuela's reserves of
oil
An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) and lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturate ...
,
gasoline
Gasoline ( North American English) or petrol ( Commonwealth English) is a petrochemical product characterized as a transparent, yellowish, and flammable liquid normally used as a fuel for spark-ignited internal combustion engines. When for ...
,
gold
Gold is a chemical element; it has chemical symbol Au (from Latin ) and atomic number 79. In its pure form, it is a brightness, bright, slightly orange-yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal ...
, and
diamond
Diamond is a Allotropes of carbon, solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. Diamond is tasteless, odourless, strong, brittle solid, colourless in pure form, a poor conductor of e ...
s.
Maduro stated that the petro would allow Venezuela to "advance in issues of
monetary sovereignty
Monetary sovereignty is the power of the state to exercise exclusive legal control over its currency, broadly defined, by exercise of the following powers:
* Legal tender – the exclusive authority to designate the legal tender forms of payment.
...
", and that it would make "new forms of international financing" available to the country.
Opposition leaders, however, expressed doubt due to
Venezuela's economic turmoil,
pointing to the
falling value of the
Venezuelan bolívar
The bolívar is the official currency of Venezuela. Named after the hero of South American independence Simón Bolívar, it was introduced by President Antonio Guzmán Blanco, Guzman Blanco via the monetary reform of 1879, before which the Vene ...
, its
fiat currency
Fiat money is a type of government-issued currency that is not backed by a precious metal, such as gold or silver, nor by any other tangible asset or commodity. Fiat currency is typically designated by the issuing government to be legal tender, ...
, and $140 billion in foreign debt.
On 5 January 2018, Maduro announced that Venezuela would issue 100 million
tokens of the petro, which would put the value of the entire issuance at just over $6 billion. 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.
Carlos Vargas is the "Superintendent of Cryptocurrencies".
Also in January, as a response to the petro, Venezuela's
National Assembly
In politics, a national assembly is either a unicameral legislature, the lower house of a bicameral legislature, or both houses of a bicameral legislature together. In the English language it generally means "an assembly composed of the repr ...
, headed by the opposition
Democratic Unity Roundtable
The Democratic Unity Roundtable (, MUD) was a catch-all electoral coalition of Venezuelan political parties formed in January 2008 to unify the opposition to President Hugo Chávez's United Socialist Party of Venezuela in the 2010 Venezue ...
, declared the petro to be an illegal debt issuance by a government desperate for cash, and has said it will not recognize it.
In a document leaked to and reviewed by ''
Reuters
Reuters ( ) is a news agency owned by Thomson Reuters. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide writing in 16 languages. Reuters is one of the largest news agencies in the world.
The agency ...
'', 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
Petróleos de Venezuela, S.A. (acronym PDVSA, , English language, English: Petroleum of Venezuela) is the Venezuelan state-owned oil and natural gas company. It has activities in exploration, production, refining and exporting oil as well as e ...
, the country's state-owned oil company, to incorporate cryptocurrencies in its dealings with foreign companies.
Launch
The petro's pre-sale started on 20 February 2018 and ended on 19 March 2018 where 38.4 million tokens were made available. The government stated the pre-sale raised US$3.3 billion, though according to
Steve Hanke
Steve H. Hanke (; born December 29, 1942) is an American economist and professor of applied economics at the Johns Hopkins University in Baltimore, Maryland. He is also a senior fellow at the Independent Institute in Oakland, California, and ...
no independent audits were made to verify this claim.
The technological identity of petro was perplexing during its genesis. Initially, the
white paper
A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. Since the 199 ...
stated that the currency would be on the
Ethereum
Ethereum is a decentralized blockchain with smart contract functionality. Ether (abbreviation: ETH) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. It is open-s ...
platform, but the white paper was changed at launch and the platform was to be NEM. However, even after the launch, white papers in various languages still shared conflicting information as to which platform the petro was part of.
In October 2018, the white paper was changed once again, and a core developer of Ethereum, Joey Zhou, stated that the new petro white paper blatantly plagiarized from the GitHub repository of
Dash
The dash is a punctuation mark consisting of a long horizontal line. It is similar in appearance to the hyphen but is longer and sometimes higher from the baseline. The most common versions are the endash , generally longer than the hyphen ...
. The newest version of the white paper revealed that petro was a clone, effectively a fork, of the cryptocurrency
Dash
The dash is a punctuation mark consisting of a long horizontal line. It is similar in appearance to the hyphen but is longer and sometimes higher from the baseline. The most common versions are the endash , generally longer than the hyphen ...
.
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.
The second phase of the petro launch involves a public sale of 44 million tokens.
Petro gold
On 21 February 2018, petro gold, a
gold-backed cryptocurrency, was announced in a televised speech given by Venezuelan President Nicolás Maduro. It was not clear whether the gold backing the tokens would be actual
gold reserves
A gold reserve is the gold held by a national central bank, intended mainly as a guarantee to redeem promises to pay depositors, note holders (e.g. paper money), or trading peers, during the eras of the gold standard, and also as a store of v ...
or some kind of share of the country's untapped mineral wealth.
Currency reform
In August 2018, the Maduro government carried out a currency reform, centered around replacing the old
hard bolívar currency with the
sovereign bolívar. One sovereign bolívar is worth a hundred thousand hard bolívares. Under the country's
fixed exchange rate
A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a currency basket, basket of other currenc ...
to the US dollar the new currency is
devalued
In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curre ...
by roughly 95% compared to the old hard bolívar. Additionally, the sovereign bolívar 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.
Following the reform,
Reuters
Reuters ( ) is a news agency owned by Thomson Reuters. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide writing in 16 languages. Reuters is one of the largest news agencies in the world.
The agency ...
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.
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.
Experts in economics stated that it was impossible to link the petro to the sovereign bolívar because no one knows its legitimate value.
Though "reservations" were sold by the Venezuelan government to obtain petros, no petros had been released by the Venezuelan government.
Design
The design of the petro by the Venezuelan government has been controversial, with
white paper
A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. Since the 199 ...
changing by the day even after the petro's pre-sale.
Petros were 100% "pre-mined" by the Venezuelan government, meaning that new
tokens cannot be created after the issuance.
Members of the Venezuelan Ministry of University Education, Science and Technology allegedly under advisory of the
Russian government
The Russian Government () or fully titled the Government of the Russian Federation () is the highest federal executive governmental body of the Russian Federation. It is accountable to the president of the Russian Federation and controlled by ...
designed the petro to circumvent United States sanctions, with Russian president
Vladimir Putin
Vladimir Vladimirovich Putin (born 7 October 1952) is a Russian politician and former intelligence officer who has served as President of Russia since 2012, having previously served from 2000 to 2008. Putin also served as Prime Minister of Ru ...
denying official involvement.
[ On 1 October 2018, the cryptocurrency switched to an X11 algorithm-based design, which was copied from ]Dash
The dash is a punctuation mark consisting of a long horizontal line. It is similar in appearance to the hyphen but is longer and sometimes higher from the baseline. The most common versions are the endash , generally longer than the hyphen ...
.
Transactions
During the ICO
is a 2001 action-adventure game developed and published by Sony Computer Entertainment for the PlayStation 2. It was designed and directed by Fumito Ueda, who wanted to create a minimalist game based on a "boy meets girl" concept. Originally ...
petros could only be purchased from the Venezuelan government with Russian ruble
The ruble or rouble (; Currency symbol, symbol: ₽; ISO 4217, ISO code: RUB) is the currency of the Russia, Russian Federation. Banknotes and coins are issued by the Central Bank of Russia, which is Russia's central bank, monetary authority ind ...
s, Bitcoin
Bitcoin (abbreviation: BTC; Currency symbol, sign: ₿) is the first Decentralized application, decentralized cryptocurrency. Based on a free-market ideology, bitcoin was invented in 2008 when an unknown entity published a white paper under ...
, NEM and Ethereum
Ethereum is a decentralized blockchain with smart contract functionality. Ether (abbreviation: ETH) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. It is open-s ...
. The minimum required investment to acquire the crypto-asset in 2018 was 50 euros (or its equivalent) per digital wallet or 1000 euros (or its equivalent) per bank deposits.
Venezuela legally allowed the use of petro for virtually any payment including oil trade, taxes, fees, real estate, gasoline, flights and more.
Price and volatility
Weiss Cryptocurrency Ratings states that the white paper
A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. Since the 199 ...
shows no method as to how the Venezuelan government will base the petro on oil prices
The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPE ...
, concluding that the currency "is a worthless token". 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 a 2001 action-adventure game developed and published by Sony Computer Entertainment for the PlayStation 2. It was designed and directed by Fumito Ueda, who wanted to create a minimalist game based on a "boy meets girl" concept. Originally ...
) is referenced on its web page.
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. 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
Anzoátegui State (, ) is one of the 23 states of Venezuela, states of Venezuela, located in the northeastern region of the country. Anzoátegui is well known for its beaches that attract many visitors. Its coast consists of a single beach approx ...
to be exchanged into bolivares or other currencies. However, President Maduro has made contradictory statements saying that the petro's worth may be determined solely by market value.
Reception
United States
The United States Department of the Treasury
The Department of the Treasury (USDT) is the Treasury, national treasury and finance department of the federal government of the United States. It is one of 15 current United States federal executive departments, U.S. government departments.
...
warned that participating in Venezuela's proposed initial coin offering
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of c ...
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". President
President most commonly refers to:
*President (corporate title)
* President (education), a leader of a college or university
*President (government title)
President may also refer to:
Arts and entertainment Film and television
*'' Præsident ...
Donald Trump
Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who is the 47th president of the United States. A member of the Republican Party (United States), Republican Party, he served as the 45 ...
signed an executive order
In the United States, an executive order is a directive by the president of the United States that manages operations of the federal government. The legal or constitutional basis for executive orders has multiple sources. Article Two of the ...
prohibiting transactions in any Venezuelan government-issued cryptocurrency by a United States person or within the United States, effective 19 March 2018, after claiming it was designed to obfuscate US sanctions and access international financing.
Others
The Brookings Institution
The Brookings Institution, often stylized as Brookings, is an American think tank that conducts research and education in the social sciences, primarily in economics (and tax policy), metropolitan policy, governance, foreign policy, global econo ...
stated that "it is relatively unsurprising that a dictatorship with little reserve currency ... has resorted to a deceitful means like introducing the petro ... the 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".
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. Supply-side economist Steve Hanke
Steve H. Hanke (; born December 29, 1942) is an American economist and professor of applied economics at the Johns Hopkins University in Baltimore, Maryland. He is also a senior fellow at the Independent Institute in Oakland, California, and ...
, who studies hyperinflation in Venezuela, stated that the petro was likely to wind up "in the graveyard", later saying of 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." Other analysts point to its government control or centralisation as its greatest weakness. Financial journalist Max Keiser expressed his support in light of the country's hyperinflation
In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real versus nominal value (economics), real value of the local currency, as the prices of all goods increase. This causes people to minimiz ...
.
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. Initially, from its white paper
A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. Since the 199 ...
which was released in January 2018, the petro was missing some important information regarding its mechanism to its technology
Technology is the application of Conceptual model, conceptual knowledge to achieve practical goals, especially in a reproducible way. The word ''technology'' can also mean the products resulting from such efforts, including both tangible too ...
. After a couple of weeks, a new version of the white paper was released which announced a different blockchain
The blockchain is a distributed ledger with growing lists of Record (computer science), records (''blocks'') that are securely linked together via Cryptographic hash function, cryptographic hashes. Each block contains a cryptographic hash of th ...
platform on which the petro would be built.
Investment
''The Washington Post
''The Washington Post'', locally known as ''The'' ''Post'' and, informally, ''WaPo'' or ''WP'', is an American daily newspaper published in Washington, D.C., the national capital. It is the most widely circulated newspaper in the Washington m ...
'' 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".
See also
* Petrocurrency
* Hyperinflation in Venezuela
* Venezuelan bolívar
The bolívar is the official currency of Venezuela. Named after the hero of South American independence Simón Bolívar, it was introduced by President Antonio Guzmán Blanco, Guzman Blanco via the monetary reform of 1879, before which the Vene ...
* CBDC
References
Further reading
*
External links
Official website (archived from the 2021 original)
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{{Authority control
Currencies of Venezuela
Cryptocurrency projects
Internet properties established in 2018
2018 establishments in Venezuela
2024 disestablishments in Venezuela
Currencies introduced in 2018