When President Nicholas Maduro announced the launch of ‘Petro’, a new cryptocurrency in December 2017, Venezuelans and crypto fans, alike, rejoiced. According to the government, the coin was meant to supplement the Bolivar as well as help the nation overcome sanctions imposed both by the US and the EU.
Further, details emerged that the coin was backed by natural resources such as oil, gas, gold, and diamonds. The government even went as far as to claim that issuing the Petros could help raise as much as $6bn which could help Venezuela fund part of the country’s obligations. Sources relating to the government cited that Venezuela allocated as much as five billion barrels of oil to back its new form of digital currency.
Additionally, all of these ventures showed promise that international governments were warming towards cryptocurrency and were finally realizing its benefits. However, fast forward to a little over a year and the high hopes that fans of the scheme have long since diminished.
Petro in 2019
Despite the mass publicity and weight of the promises it once held, Petro has had very little to show for its initial hype. The currency was finally rolled out in February 2018 and is estimated to have raised 3.3 billion USD by selling 38.4 million tokens during its pre-sale. According to sources from within the country, state-sanctioned exchange, Amberes, as well as other platforms such as Afx Trade, Bancar, Cave Blockchain, etc. facilitate the trade of the same.
However, the genuineness of these reports has also been highly doubted and it is important to note that no independent audits were carried out to verify these claims. The scheme was also met with widespread controversy and faced international backlash, with the President of the United States, Donald Trump signing an executive order barring any US-based transactions involving the cryptocurrency. US government officials even warned that it was nothing more than a scam by President Maduro to further undermine democracy in the politically unstable nation.
Furthermore, the structure of the coin was regarded as highly complex and vague from the very beginning with the white paper of the currency initially stating that the currency would be based on the Ethereum platform while actually changing to NEM during the actual launch. Petros were also designed to be solely pre-mined by the government, which means that no new coins can be created upon its final issuance.
Additionally, while it is legal in Venezuela to utilize Petro for virtually any payment in a large number of sectors, as per multiple reports on the matter, no one has actually been able to purchase any form of goods and services with the currency. These factors combined with unexpected shutdowns of the platform led prominent economists and experts on the matter to brand it ‘a blatant scam.’
According to Bloomberg, various sites such as ICOindex, Cryptorated, and ICOreview who are regarded as important players in the crypto rating market either gave the coin negative reviews or failed to even rate it at all due to its status.
It is safe to conclude that the Petro is a poor example of a digital coin being adopted by a government and cannot even truly be regarded as a cryptocurrency, but merely a ploy to leverage the blockchain hype. While the negative coverage has not stopped President Maduro’s efforts to generate publicity for the coin, with the government going as far as to approach several exchanges to make it tradable, the coin is widely regarded as fraudulent and useless in the crypto community.
Despite these disappointing factors, there is still hope for formal adoption of cryptocurrency around the world, with skeptics slowly warming to it. However, the example of Petro in Venezuela is daunting enough to crash the dreams of even the most seasoned investors, especially with the number of ICO scams running rampant in recent times. Hence, despite all the promises of a new dawn, only time will truly tell whether cryptocurrencies will be recognized and used internationally for transactions on a global scale.
Will cryptocurrencies be adopted by governments in the near future? Can measures be undertaken to restore widespread faith in ICOs and prevent situations like the Petro Coin in the future? Please let us know your thoughts and views on the matter in the comment section below.
(The views and opinions expressed in the article are solely the author’s and does not necessarily represent any of the actual entities mentioned above)