Venezuelan President Nicolas Maduro on Wednesday claimed that the pre-mined cryptocurrency Petro, the first such token issued by a sovereign government, has raised USD 735 million on the first day of its pre-sale.
The oil-backed coin was offered for pre-sale on a discount starting Tuesday, the same day Venezuelan government released the white paper and buyers’ manual.
The government will issue 100 million coins of Petro of which 38.4 million is available for pre-sale and 44 million coins will be offered in an ICO in March. The rest 17.6 million coins will be retained by the Venezuelan Superintendency of Currency and Related Activities (SUPCACVEN).
“The funds raised in the initial issue will allow the continuous technological development of Petro and its ecosystem in order to promote its massive adoption. The use of the funds will be auditable thanks to the transparency of smart contracts in the blockchain,” the white paper reads.
Going by history, however, the Venezuelan government haven't been good companions with the idea of transparency. The Socialist Party jealously guards even the most basic of information - including about inflation.
The Petro's price will depend on the price of a barrel of Venezuelan oil from the previous day, according to the government's website. Though, the government has pegged the initial value of Petro at USD 60 billion, selling the coins at USD 60 each during pre-sale.
Venezuela has one of the largest oil reserves in the world. According to the numbers provided by the socialist state, it has over 300 billion barrels oil reserves — largest in the world.
The country which earns 95 percent of its forex from oil exports is going through one of the biggest financial crisis in its history. Its fiat currency Bolivar has gone through 99 percent depreciation in its value. The government’s track record raises doubts about its capability of managing digital assets.
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The government said it will accept Petro as a form of payment of national taxes, fees, contributions and public services taking as a reference the price of the barrel of the Venezuelan basket of the previous day.
However, the decision by the government has also attracted wide criticism. Opposition leaders call the state-backed cryptocurrency an illegal debt issue, and investors have questioned its value given concerns about Venezuela's solvency and transparency.
An encouraging response to Petro has motivated the government to raise another cryptocurrency based on gold. "Next week I'm going to launch the Petro Gold, backed by gold, which is even more powerful, that will strengthen the Petro," Maduro said in a televised speech.
This will, though, not be the first cryptocurrency based on gold. Many such currencies are traded in the market including one called RMG created by The Royal Mint in Britain.
But blockchain experts have broadly panned Venezuela's cryptocurrency efforts, noting that digital tokens are only as valuable as the faith inspired by their issuer.
Sean Walsh, the founder of crypto-asset investment firm Redwood City Ventures, said it was difficult to draw conclusions about the Petro Gold without seeing specific details. But he said he had little interest in tokens backed by physical assets.
"Rather than buying a cryptocurrency backed by gold, I'd just go buy the gold," said Walsh in a telephone interview. "Gold is a physical thing that you want to be able to hold in your hands, because that's the point."
Future of Petro
The success of Petro depends a lot on how the global crypto-community responds to its offer.
Moreover, the governments and regulators have already started warning investors against the financial and legal risks.
The US Treasury Department has warned that Venezuelan cryptocurrencies could violate sanctions and thus create legal risk for US investors.
However, Venezuela is successful in managing digital assets and is able to circumvent the sanctions imposed on it, it could open new ways for other sanctioned countries to be financially stable despite the curbs.(With inputs from Reuters)