In a new twist to the cryptocurrency craze, Venezuela, the South American oil giant in default on some of its dollar bonds, plans to issue its own digital unit, dubbed the petro.
"It is a matter of days before we announce the first issuance of the ‘petro’ cryptocurrency," Information Minister Jorge Rodriguez said at a press conference broadcast on state TV Thursday. The petro will help Venezuela, which has faced increasing diplomatic isolation over President Nicolas Maduro’s crackdown on domestic political opposition, avoid attacks from the international financial system, according to Rodriguez.
The petro will be different from bitcoin and other cryptocurrencies because it will be backed by hard assets, Rodriguez said. Maduro on Wednesday certified that some 5 billion barrels of Venezuelan oil reserves will be used as financial backing for the petro, according to the nation’s oil ministry.
That oil can support financial instruments worth $267 billion, the ministry said in the statement. By comparison, bitcoin, the largest cryptocurrency, has a market capitalization of about $246 billion, according to coinmarketcap.com.
Simon Quijano-Evans, a strategist at Legal & General Investment Management Ltd. in London, is skeptical of the scheme, saying that investors who have lost confidence in Venezuela are unlikely to be drawn to assets repackaged as a cryptocurrency.
“That collateral or ‘state-backing’ is meant to be supporting the existing currency and bonds,” Quijano-Evans said. “Given that process has failed it seems rather hard to see investors being attracted by the same thing in a different wrapping.”
Bitcoin itself has been a popular store of value in countries with rudimentary financial systems and depressed economies. The removal last month of Robert Mugabe as Zimbabwe’s president triggered a surge in the price of bitcoin on the local exchange to double the international rate.