Venezuela launched the presale of its own cryptocurrency Feb. 20, named the "petro," that will be backed by the country's crude oil and other commodities, Coindesk reported.
The cryptocurrency's first operation will involve a private sale of 38.4 million petro tokens, which will run until March 19, El País said. Another 44 million will be sold in an initial coin offering, or ICO, on March 20 while a remaining 17.6 million will be reserved by the government, for a total of 100 million tokens.
A 100 million-token issuance of the petro would be equivalent to at least $6 billion, President Nicolás Maduro said in an earlier statement.
In addition to being backed by a barrel of Venezuela's crude oil, the tokens will also be supported by the country's gas, gold and diamond reserves, Maduro previously said. The petro will not initially be denominated in the Venezuelan bolivar, which has collapsed amid Venezuela's hyperinflation, and instead will be pegged to the country's basket of fuel and oil exports.
The government will accept the petro as a form of payment for taxes, fees, contributions and national public services, according to the cryptocurrency's official website. Investors should open a digital wallet in order to use the petro, the website added.
Government advisers have recommended privately auctioning 38.4% of the petros at a 60% discount, Reuters reported. The newswire also cited a document saying the petro will not be part of the Ethereum network, as previously mentioned in a government-sourced whitepaper.
The Venezuelan government is looking to attract investments from Turkey, Qatar and other Middle Eastern countries as well as the U.S. and Europe, said Carlos Vargas, the country's cryptocurrency superintendent.
Cryptocurrencies are digital assets which are decentralized and not issued by central banks. Instead, they are created virtually through a shared registry of transactions in a technology known as "blockchain." Cryptocurrencies have been popular among Venezuelans seeking to circumvent U.S. sanctions to obtain dollars or make internet purchases.
Maduro hopes the petro will help rebuild the economy amid a longstanding financial crisis and the severe devaluation of the bolivar. A country that has relied mostly on its oil exports, Venezuela has seen its economy nosedive amid falling commodity prices and economic blunders that have produced a shortage in food, medicine and cash used to pay the country's debts.
However, the U.S. Treasury Department has warned possible investors that the purchase of the petro could violate the sanctions it imposed last year. Since the U.S. levied the sanctions, Maduro's administration has struggled to refinance its growing debt burden. According to Fitch Ratings, Venezuela's debt restructuring would be long and complex as it lacks the political and economic prerequisites for the process, echoing similar sentiments from Moody's and S&P Global Ratings.
Meanwhile, Venezuela's opposition said the sale involves an illegal debt issuance that bypasses an opposition-dominated Congress.
Daniele Bianchi, an assistant finance professor at Warwick Business School, casts doubts on the capacity of the Venezuelan government to sustain its own cryptocurrency operations, given its inflation and oil production problems.
"Although it is allegedly backed by the price of Venezuela's oil reserves, there is no reason why a rational investor should put money into [the petro] ... Venezuela is arguably defaulting on its debts, and unless one really believes that this is merely due to outside financial sanctions, there is no reason why this could not happen with the Petro as well," Bianchi said.
The launch of the petro will represent the largest ICO ever proposed at an expected $5 billion, accounting for about 5% of the Ethereum network's total ether tokens in circulation and almost equal to the total revenue generated by ICOs in 2017, Bianchi noted.
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