What Is El Petro?
El Petro is the first cryptocurrency to be issued by a federal government. According to the Venezuelan government, el Petro is an oil-backed token issued as a form of legal tender that can be used to pay taxes, fees and other public services/needs.
The Government described its plans for el Petro on a Website built exclusively for the cryptocurrency, hosted by the country's Ministerio del Poder Popular para Educación Universitaria Ciencia, Tecnología (MPPEUCT).
According to the government's website, el Petro's price will be ultimately attached to the price of a barrel of Venezuelan, derived from the previous day’s price.
How Does El Petro Work?
To put it simply, el Petro will have three main facets:
1) MEANS OF EXCHANGE: El Petro (PTR) token will be used to buy goods and services, pay taxes and other public services. It can be traded for fiat money or other cryptocurrencies through digital exchange houses, and can also be used as a payment method for Venezuelan oil via direct exchange of PTR to real oil dispatch.
2) DIGITAL PLATFORM: El Petro will feature a digital platform that will allow to issue and trade crypto assets backed up by raw minerals, and also create other digital instruments to trade nationally and internationally.
3) SAVINGS AND INVESTMENT FACILITY: El Petro will be available in electronic exchange houses, with zero trading fees, and will have the essential characteristics to be traded using Atomic Swap technology, in a completely safe environment and in accordance with the Venezuelan legal framework.
The Bolivarian Republic of Venezuela assures the acceptance of el Petro as a payment method of national taxes, fees, contributions and public services, using the price of the Venezuelan barrel in the previous day as a reference.
To increase the adoption the government created a special discount index, named 'Dv', that will at least give a 10% discount.
The above information indicates, that it would be at least 10% cheaper to pay taxes using el Petro at the current exchange rate than it is in Bolivars.
According to the government, in the future, the use of el Petro is planned to grow into other payment markets promoting its use in the world as a currency backed by a real resource. The white paper reads:
“The Venezuelan government is committed to promoting the use of el Petro in the domestic market and making efforts to encourage its acceptance throughout the world.”
El Petro Emission, ICO and Value
El Petro’s sale will be divided into two stages: The Pre-sale and the Initial Coin Offer (ICO), and a total of 100 mln coins will be emitted and distributed as follows: 38.4% presale, 44% public sale and 17.6% will be stored by Venezuela’s Superintendence of Cryptocurrencies and Related Activities.
The Pre-sale will take place on the 20th of February and will last until the 19th of March, and it basically consists on the creation and sale of 38,400,000 Petros (PTR) on the NEM blockchain platform. The Pre-sale token will not be part of the Petro network until the Initial Coin Offer and distribution process ends and is merely a placeholder for the official token that will be later launched.
El Petro’s ICO will start right after the Pre-sale is over, on the 20th of March, and will last until all the eighty-two million four hundred thousand (82,400,000) units available are sold (Pre-sale + ICO). During the ICO, PTR Tokens will be priced at $60 (Current price of Venezuelan barrel) and will be created and sold through an auditable mechanism in the blockchain.
No additional tokens will be issued without the approval of Petro’s holders, in a vote conducted in the Petro’s blockchain on the basis of 1 Petro = 1 vote. Regarding its divisibility, el Petro will be divisible by 100.000.000 units. The minimum exchange unit will be called Mene (0,00000001 PTR).
The value of the entire el Petro issuance of 100 million tokens would be just over $6 billion (at current barrel prices) and the tokens will each be valued at a barrel of Venezuelan crude oil, according to the Venezuelan president. Therefore, el Petro’s market cap will always be calculated and depending on the price of the Venezuelan barrel.
What are the economic, financial and trade implications of sovereign cryptos?
One of the reasons the Venezuelan government came up with a state-backed cryptocurrency was the prolonged economic stagnation in Venezuela, combined with high inflation, expected to hit the 13,000% mark in 2018 by the International Monetary Fund.
According to the Whitepaper, El Petro will be a helping hand to Venezuelan economy, replacing the dying, if not already dead, domestic Bolivar with a liquid cryptocurrency that is backed by a finite resource, Venezuelan oil. The Venezuelan central bank recently announced that its DICOM exchange rate would be at 30,987.5 bolivars per euro. DICOM is the country’s only official exchange rate, though on the black market a dollar is worth around 230,000 bolivars.
Given such conditions, the launch of the coin is nothing less than an attempted emission a new national cryptocurrency collateralized by "potential" oil reserves.
In the case of el Petro, even if launched successfully, it seems unlikely to have a positive impact on Venezuela’s ill economy. First of all, a large part of the supply will remain in the hands of the government, a notion that is somewhat contradictory to the cryptocurrency ideology. As such, the cryptocurrency will remain strictly centralized, leaving a lot of room for corruption and consolidation of power.
Opposition leaders have said the ICO constitutes an illegal debt issuance that circumvents Venezuela’s majority-opposition legislature, and the U.S. Treasury Department has warned it may violate sanctions levied last year.
Harry Colvin, director and senior economist at Longview Economics, expressed his disbelief on the potential success of el Petro. According to CNBC Colvin stated:
"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. If President Maduro loses the election in April then petros would probably be made illegitimate."
On the same topic, Matthew Newton, Analyst at eToro, said:
“Through ICOs, cryptocurrencies have shown that start-ups have been able to circumvent traditional finance and fundraising by reaching a global audience through technology and pitching their ideas directly. With Petro, we are witnessing this opportunism on a much grander scale, and the first of its kind. Other sanctioned nations will be watching closely as Petro could set a precedent.”
Why Are Countries Jumping Into The Cryptoworld at a National Level?
Imposed largely by the United States and the European Union, there are several sanctions that prohibit countries like Venezuela, Iran, Russia, and others from certain financial activities and markets. For example, Venezuela is banned from selling its highly downgraded and close-to-default government bonds for US dollars. Russia and Iran have also experienced difficulties in accessing the global financial markets due to these sanctions. Iran being cut off from the international SWIFT system since 2012, is a good example.
Countries under these special restrictions have been constantly searching for a way to bypass or circumvent them in order to access global markets. Most recently, this has led to the creation of state-run cryptocurrencies, with Venezuela’s el Petro taking the lead. The creation of this state-run crypto is to enter the global markets, circumventing U.S and E.U sanctions.
- Trippki - The Evolution of Travel Sponsored
- You42: Revolutionizing The Entertainment Industry Sponsored
- What is a Bitcoin ETF?
- DEx.top: How to buy and sell Ethereum
- Why the CryptoCompare team has chosen the Ledger Wallet
- CryptoCompare Portfolio FAQ
- Where to spend your Bitcoins
- CryptoCompare.com - Who we are!