Venezuela plans Gold-based Cryptocurrency

Venezuelan President Nicolas Maduro is at it again. He is planning to launch a gold-backed cryptocurrency called Petro Gold.

“Next week I’m going to launch the Petro Gold, backed by gold; which is even more powerful, to strengthen the Petro,” Maduro announced on 21 February 2018. Maduro is apparently hoping to repeat the big payday he received from the Petro initial cryptocurrency offering (ICO).

Venezuela reportedly sold $735 million (£527 million) worth of the oil-based Petros earlier this month. Now Maduro wants to repeat that performance and snag more suckers by using the magic word gold.

Is Petro Gold Legal?

The Petro Gold will be backed by gold and other precious metals, The Express reported. Companies in Brazil, Poland, Denmark, Honduras, Norway, and the Middle East are apparently accepting the Petro in payment. Maduro hopes that they will accept Petro Gold as well.

The value and legality of the Petro and Petro Gold are questionable because of U.S. and European Union (EU) sanctions on Venezuela. A greater problem might be Venezuela’s creditors who might come after Petro and Petro Gold owners in order to get at least part of Venezuela’s mountain of unpaid debts paid off.

The Chinese oil company Sinopac is suing Venezuela’s state oil company PDVSA for $23.70 million and damage in a U.S. District Court in Houston, Texas, The Financial Times reported. The suit apparently stems from Chinese steel that PDVSA bought through Sinpoac but never paid for.

Will Maduro use the Petro to pay off Venezuela’s debts?

This suit probably the tip of the iceberg because Chinese companies might have loaned $16.5 billion to $25 billion between 2007 and 2017, The Financial Times estimated. Since they presumably want their money, it is a strong possibility those Chinese companies will go after Petro and Petro Gold owners.

The Venezuelans were trying to pay off the loans to China with shipments of 505,000 barrel of oil a day. Unfortunately, the value of the oil shipments and the amount of repayment has been falling. Other Venezuelan creditors include Russia, Maduro is trying to buy off Russian creditors by restructuring debt, The Financial Times reported.

A strong possibility is that Maduro may try to pay creditors off with Petros or Petro Gold. It remains to be seen if they will accept his cryptocurrency in payment. If they do the real losers will be the Venezuelan people who will not see a cent.

Hopefully, Maduro’s shenanigans will not give government-issued cryptocurrencies a bad name.

Venezuela’s President Nicolas Maduro (C) delivers a speach next to Vice-President Tarek El Aissami (L) next to Venezuela’s Minister of Science, Technology and University Education Hugbel Roa (R) during a press conference to launch to the market a new oil-backed cryptocurrency called “Petro”, at the Miraflores Presidential Palace in Caracas, on February 20.
Venezuela formally launched its new oil-backed cryptocurrency on Tuesday in an unconventional bid to haul itself out of a deepening economic crisis. The leftist Caracas government put 38.4 million units of the world’s first state-backed digital currency, the Petro, on private pre-sale from the early hours. A total of 100 million Petros will go on sale, with an initial value set at $60, based on the price of a barrel of Venezuelan crude in mid-January.
Venezuela formally launched its new oil-backed cryptocurrency on Tuesday in an unconventional bid to haul itself out of a deepening economic crisis. The leftist Caracas government put 38.4 million units of the world’s first state-backed digital currency, the Petro, on private pre-sale from the early hours. A total of 100 million Petros will go on sale, with an initial value set at $60, based on the price of a barrel of Venezuelan crude in mid-January.
/ AFP PHOTO / FEDERICO PARRA (Photo credit should read FEDERICO PARRA/AFP/Getty Images)

Russia and Iran Planning National Cryptocurrencies

One person watching Maduro and the Petro is Vladimir Putin who is reportedly planning a “Crypto Rubble,” The Express reported. Current plans call for the Crypto rubble to be launched in 2019.

Also watching the Petro will be Iran’s Post-bank which is developing a cryptocurrency, The Express reported. Minister of Information Mohammad-Javad Azari Jahromi tweeted that such a cryptocurrency is in the works on 21 February.

“In a meeting with the board of directors of Post Bank on digital currencies based on the blockchain, I … prescribed … measures to implement the country’s first cloud-based digital currency,” Jahormi tweeted.

The Iranian cryptocurrency might be a better investment than the Petro because it might be used in countries that accept the Iran nuclear deal. Even though U.S. President Donald J. Trump (R-New York) refuses to acknowledge the deal several other major powers including Russia, Germany, and the UK accept it.

 

Another advantage that Iran has it is that it has not racked up a mountain of debt like Venezuela has. A long-term advantage Iran has is that a future U.S. president, who will likely be in office in 2021, is likely to sign back onto the nuclear deal and end sanctions.

Something to remember is that Trump’s predecessor Barrack Obama (D-Illinois) was the architect of that deal. A future Democratic president or a moderate Republican like John Kasich (R-Ohio) is likely to sign onto it.

It looks like we are living in the age of government cryptocurrencies. One has to wonder when a major economic power like China launches its own altcoin?