Venezuela has officially launched the pre-sale its new digital currency called the petro.

"Petro is born, and we are going to have a total success for the welfare of Venezuela," President Nicolas Maduro said on Tuesday.

The launch of the so-called cryptocurrency comes as Venezuela faces deepening economic and political crises.

According to the government, the petro is backed by oil, gas, gold and diamonds, and is meant to help overcome US and EU sanctions.

Here is what we know about the new currency.

What is the petro?
• The idea for the petro came from Hugo Chavez, who had foreseen a "strong currency backed by raw materials", according to the government's white paper on the petro.
• Announced in December 2017, the petro is intended to supplement Venezuela's bolivar fuerte (VEF) currency and help overcome US sanctions.
• Petros will be "pre-mined", meaning the government would produce and control it.
• Venezuela has allocated five billion barrels of oil to back its new digital currency, which will be tied to the cost of a barrel of Venezuelan oil.

Where can you buy it?
• Initially, the petro will be sold in hard currency and other cryptocurrencies, not in the local bolivar currency.
• “The presale and initial offer will be made in hard currencies and in cryptocurrencies," Carlos Vargas, the government cryptocurrency superintendent, told state television in late January.
• "It is not going to be done in bolivars at this stage,” he added.
• "Our responsibility is to put [the petro] in the best hands and then a secondary market will appear."
• Vargas also said that after the initial sale, the petro could be sold in exchange for the bolivar.

How much does it cost?
• Each petro will be backed by a barrel of oil and will be sold at the same price, according to the government.
• Prior to the launch, government advisers recommended that 38.4 percent of the petros should be sold in a pre-sale private auction at a discount of 60 percent.

What can you buy with it?
• Vargas said that each petro could be exchanged through the virtual exchange houses, "but in addition to that, there will be many merchants providing goods and services where you can go with your Petro or any crypto currency to exchange it for a service".
• He added: "In a short future Venezuelans can buy in the bakery with the Petro."

Will it help Venezuela's economy?
• At current prices ($62 per barrel) 100m petros could help raise around $6bn. The government argues this could help Venezuela pay part of the country's obligations.
• The Venezuelan minister of foreign trade, Jose Vielma Mora, announced that Venezuela would pay for imports from Brazil using the petro cryptocurrency.
• "A group of Brazilian companies have agreed to receive payment for the sale of food to Venezuela, through petro, starting on February 20, when the pre-sale of the cryptocurrency [begins]," Vielma Mora added.
• None Brazil has not publicly commented on Venezuela's planned use of the petro.
• The opposition-controlled National Assembly has opposed the idea of the petro, labelling it illegal.
• The US also warned that buying the petro could violate sanctions against Venezuela, which prohibit the purchase of newly issued Venezuelan debt. </s> The logo for the petro, as seen at a news conference in Caracas last month. Reuters/Marco Bello
• Pre-sale for the petro, a cryptocurrency issued by the Venezuelan government starts on Tuesday.
• The cryptocurrency, first mooted in December, will be backed by oil, gas, gold and diamond reserves in the economically stricken nation.
• It is effectively being launched to help Venezuela circumvent financial sanctions enforced by the USA and EU.

Venezuela's government will launch the first sale of its commodity-linked cryptocurrency, the petro, on Tuesday.

The cryptocurrency, first mooted in December, will be backed by oil, gas, gold and diamond reserves in the economically stricken Latin American nation.

Tuesday's launch comes in the form of a pre-sale, where potential buyers can sign up to get the petro when it officially launches. The token will attract investment from Turkey, Qatar, the United States and Europe, the country's cryptocurrency regulator, Carlos Vargas, told reporters last week.

Venezuela will issue around 100 million petros, equivalent to around $6 billion.

When the currency was first announced, Venezuela's president, Nicolas Maduro said that it will help Venezuela to "advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade."

The cryptocurrency is effectively being launched to help Venezuela circumvent financial sanctions enforced by the USA and EU against the country as a punishment for its increasingly authoritarian regime.

"The Venezuelan government is looking to take advantage of one of the key features of cryptocurrencies - decentralisation," Matthew Newton, an analyst at trading platform eToro said in an email.

"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."

Initially, buyers will be able to use existing cryptocurrencies like bitcoin, as well as fiat currencies like the US dollar, to buy the petro. They will not, however, be able to use Venezuela's currency, the bolivar.

The bolivar is famously weak after hyperinflation in recent years has left it virtually worthless. </s> You know you're in trouble when your only hope for stability is something as notoriously unstable as cryptocurrency. And yes, Venezuela appears to be very much in trouble.

According to Bloomberg, Venezuelan President Nicolas Maduro announced on Friday that he intended to link a new national currency, the sovereign bolivar, to a cryptocurrency of his own government's making — the Petro. This is the first case of a government tying its economic fortunes so closely to that of any digital currency, and suggests a possible exit path for a country ravaged by hyperinflation.

That is, it would suggest an exit path ... if the plan had any hope of turning the country's messy economic situation around. Instead, the act devalues the bolivar by around 96 percent as it takes its new form while leaving many questions about Petro unanswered.

The changes supposedly went into effect today.

Hyperinflation expert and Johns Hopkins economics professor Steve Hanke cautioned to CNBC that the NEM blockchain-based Petro token likely won't be some magical cure-all for Venezuela's ills.

"This is a smoke-and-mirrors operation typical of Venezuela — I'll believe it when I see it," he told the publication. "The problem with the Petro is it's a scam, it doesn't even trade."

The Petro, meanwhile, is allegedly itself backed by oil — although that too has been called into question.

"They’re setting up a stand on the front porch of Venezuela to sell snake oil that’s essentially backed by nothing," managing partner Russ Dallen told McClatchy in March. "People believe it's backed by oil, but if you read the contract, it’s really not."

And while you may be itching to mortgage your future for an opportunity to score some Petro coins, those in the United States will have to wait. Back in March, President Donald Trump banned the purchase of the digital currency. It appears unlikely that the ban will be revised any time soon.

So, in summation, the 96 percent devalued Venezuelan bolivar — renamed the sovereign bolivar — is now linked to the Petro cryptocurrency. Petro, meanwhile, is a token that's supposedly backed by Venezuelan oil, yet has been called a scam.

Yeah, it sure looks like the people of Venezuela are still in trouble. </s> For Jorge Farias, boss of Venezuelan startup Cryptobuyer, the Petro is personal. Anything in the crypto world is.

But it’s a special case with the Petro, the new cryptocurrency sanctioned by Venezuela’s government and designed to boost the bolivar, the country’s inflation-plagued national currency. International experts, however, have rather blunt words for the Petro: it’s a scam on top of another scam.

Farias, smartly dressed and with short stubble, launched Cryptobuyer three years ago, to help Latin Americans use cryptocurrencies to protect their salaries and savings. Cryptocurrencies may be highly volatile; bitcoin, for example, has plummeted from its peak value of $19,000 in January to around $6,000 now. For consumers in Venezuela, however, this probably counts as fairly stable, given the hyperinflation pushing their country close to the brink of economic collapse. Logically, then, launching a cryptocurrency like the state-created Petro is a clever move, right? Wrong.

The International Monetary Fund recently forecast that Venezuela’s economy will shrink about 18 per cent this year, while inflation is set to surge to one million per cent. Two months ago, the annual rate of inflation stood at 40,000 per cent. People are scared; more than 400,000 Venezuelans have already crossed the border into the neighbouring Ecuador, trying to escape their home’s crumbling economy. Brazil has also seen a surge in illegal immigration.

The government in Caracas, though, believes that it can get on top of the situation with some rather unusual economic measures. Cryptocurrency aside, the state relaunched its official paper-and-coins currency as the ‘sovereign bolivar,’ but only after devaluing the traditional bolívar by a whopping 95 per cent and then redenominating it, slashing five zeros from each banknote. For one US dollar, you’ll now get not 250,000 bolívars but about six million. The move is not without precedent: in 2008, former president Hugo Chavez replaced an earlier incarnation of the local currency with his Bolivar Fuerte, removing three zeros at the end.

“The same thing is happening again, but now with a smoke curtain saying they will be using blockchain technology and the Petro,” says Roger Benites, chief executive of BitInka, a crypto exchange based in Lima, Peru but operating in many Latin American countries (and until recently, in Venezuela, too).

The Petro was announced last December at the peak of the crypto bubble, emerging just when Venezuelans were trying to raise billions of dollars on the back of rather vague whitepapers outlining an Initial Coin Offering. The crypto world was bemused, but curious: this might be the first time that any government would issue its own digital money. “At least the Petro had some connection to the physical world. Compared to other things that were going on in crypto at the time, maybe it wasn't that absurd of a concept after all,” says Aaron Stanley from blockchain firm Sweetbridge.

Cryptocurrencies may be disruptive, but in the Venezuelan context, the Petro looks more like a folly. Venezuelans are crypto-savvy – they’ve been forced to become experts out of necessity, as they tried to survive in the midst of a crippled economy. For many months, Venezuelans have been putting their meagre savings into bitcoin, which allowed them to avoid the collapse of the bolivar.

Bitcoin mining in Venezuela is a dangerous trade, though, and has landed many in jail. Venezuela’s government subsidises electricity, so when miners use cryptocurrency to smuggle goods into the country, the government tracks and chases them by monitoring levels of electricity consumption. The outcome is either jail – or the need to pay a hefty bribe.

“And now the country is embracing cryptocurrency? Sounds like wonderland!” says Benites. He recalls how his company’s office in Venezuela was shut down, because, he says, it was a target for extortion by public employees and local law enforcement. “One of their high-ranked officials from the police intelligence agency was treating bitcoin miners as terrorists, and even came out saying miners where physically taking bitcoins to the border of Colombia to exchange them for US dollars. The national intelligence agency was saying there was a physical bitcoin! And now they have a national cryptocurrency – so who will mine it or sustain the network?”

One Petro is supposed to get you $60 or 3,600 sovereign bolívars. It’s supposedly backed by oil barrels produced by the national oil company PDVSA; the catch: PDVSA also has debts amounting to $45 billion. And in real life, the Petro – crypto or not – doesn’t exist at all. “We have not seen a single Petro circulating, nor its smart contracts, or rules of the token, and much less its blockchain,” says Farias.

In a way, introducing the Petro is a bit like a trick pulled by Germany’s government in the 1920s, when it invented the Rentenmark to end hyperinflation, and made it stable by backing it with a mortgage on all property used for agriculture and business. Back then, it worked, not least because property was something that Germans understood and could hold on to. This time, though, the situation “is just plain nonsense, backing up a fiat currency with a cryptocurrency tied to the barrels of oil from an entity that has an external debt they cannot pay,” says Benites.

And in contrast to Germany, the Petro is more of a fundraising stunt. Its ICO has already – allegedly – raised the equivalent of $3.3bn. “It may be a stunt, but a stunt that is working,” says Dickie Armour at ICO consultancy Corre Innovation. “The question is though – working for whom? President Nicholas Maduro and his cohorts? Or the people of Venezuela? Sadly, it’s more likely to be the former,” he sighs.

Farias’ Cryptobuyer has been helping many Venezuelans from the start, offering customers gift cards for online stores like Amazon that can be paid with cryptocurrencies, allowing people to buy medicine, food and other supplies priced in dollars that would otherwise be inaccessible in a country where the government has been keeping tight tabs on currency exchange for over a decade. “We are about to issue our own token through an ICO,” says Farias. But unlike Petro, it will be “a functional, tangible product” with real and demonstrable uses. “The Petro to this day has shown to be neither one thing nor another, and is banned in the international market.”

Dangling the prospect of a new digital currency may give Venezuelans a false hope. Once the initial excitement is gone, they may quickly realise what the Petro really is – or isn’t. “The government is probably hoping that Venezuelans will think Petro is the same as bitcoin, but it isn’t,” says Gartner blockchain technology analyst, Avivah Litan. “Petro is a currency issued and controlled by the same incompetent, corrupt and opaque Venezuelan government that manages their fiat currency. People aren’t stupid, and they won’t buy it.”

It’s ironic, though, that cryptocurrency – an inherently volatile, unstable and still relatively new concept – is supposed to rescue a fiat currency. “You could say that desperate times with a starving population result in desperate action,” says Jonathan Fry from Team Blockchain. “What is any fiat currency but a promise to pay its debts or at least to pay the interest on its debts.” Cryptocurrencies are not all good, but they most definitely have a place and are a new asset class, no way to get around that, says Fry.

If the government had pegged the bolivar to bitcoin, things might pan out differently, because bitcoin is decentralised, so hackers won’t be able to take it over that easily. Most crypto fans also argue that the essence of digital money is about not having a central authority and a central bank. With bitcoin, because of the decentralisation, the state can’t take it away. With a fiat currency or Petro, it very much can.

If the Petro is nothing but a smoke screen, then why does it matter? Now that Caracas has formally launched the Petro, lawmakers in Iran and Russia are also be considering the benefits of creating their very own fiat cryptocurrency. “All of these countries have three traits in common: they are authoritarian (or deeply undemocratic), they have a lot of oil, and they are under sanctions,” says Alex Tapscott, the head of Canadian VC firm NextBlock Global. Venezuela is a case in point, showing how rogue governments could use their cryptocurrencies to undermine international law, treaties, and sanctions and further destabilise their already weak economies.

Except there is no way that it will ever work. The Petro is likely to go the same way as the Venezuelan economy itself. Fast. </s> Venezeula has announced it will be pegging its economy to a national cryptocurrency as it looks to save itself from economic ruin.

The crisis-hit South American country, which recently saw its hyper-inflation grow to more than 1,000,000 per cent, has announced it will be tying the bolivar to the government's own petro cryptocurrency.

As part of the move, the bolivar will be devalued 96 per cent, from 285,000 to the dollar to six million. In addition, corporate tax rates will go up, as will the minimum wage. Overall, Venezuela hopes that wages, pensions and prices will all be pegged to the new currency.

Announcing the news, President Nicolas Maduro said that the new "sovereign bolivar" would help the country to bounce back from its recent hardships, which he has blamed on the United States.

"I want the country to recover and I have the formula. Trust me," Maduro said on state television. "They've dollarized our prices. I am petrolising salaries and petrolising prices.

"We are going to convert the petro into the reference that pegs the entire economy's movements."

Venezeula launched its cryptocurrenncy back in February as it looked to raise cash. At the launch, President Maduro said that around 100 million petro tokens would be issued, each of which would be backed by a barrel of the nation's vast oil reserves.

However many observers warned the scheme could be a scam, with US President Donald Trump quickly signing an executive order banning Americans from investing.
• What is blockchain? Everything you need to know </s> Venezuelan President Nicolás Maduro (shown), “desperately grasping at straws to try to fix the country’s economic meltdown,” announced a series of economic policy changes over the weekend that he hopes — almost certainly in vain — will save socialism from itself, reported Agence France-Presse.

In a speech to the nation late Friday, Maduro said the country must show “fiscal discipline” and stop inflating its currency, the bolivar, which has become practically worthless. That is, of course, very good advice; but Maduro is unlikely to follow it because doing so would require slashing the massive Venezuelan welfare state and liberalizing the economy, both of which are anathema to the committed Marxist. Instead, he is employing half-measures and tricks that “analysts say … could only serve to make matters worse,” wrote AFP.

Inflation is a huge problem in Venezuela. According to Bloomberg, “Prices are currently rising at an annualized rate of 108,000 percent,” causing thousands of Venezuelans to flee the country. Unfortunately, noted the news service, inflation “will get fresh fuel from [Maduro’s] measures.”

The government introduced Monday a new currency, the bolívar soberano (“sovereign bolivar”), to replace the old bolívar fuerte (“strong bolivar”). The new one is officially valued at 100,000 times the old one, which is to say the government lopped five zeros off the old bills. In 2008, Maduro’s predecessor and mentor, the late Hugo Chávez, tried the same thing, only with three zeros, to no avail.

The new currency will be pegged to Venezuela’s “widely discredited cryptocurrency,” the petro, noted AFP, explaining:

Cryptocurrency rating site ICOindex.com has branded the petro a “scam,” while the U.S. has banned its nationals from trading in it.

“Anchoring the bolivar to the petro is anchoring it to nothing,” said economist Luis Vicente Leon, director at polling organization Datanalisis.

Right from the outset, it has not been clear how the petro would operate, nor what being backed by oil actually means.

Nevertheless, Maduro is setting the petro up as the standard for Venezuela. Its value, currently set at $60 or 3,600 sovereign bolivars, but subject to change, will be used to set prices for goods in the country.

Meanwhile, Maduro “carried out one of the greatest currency devaluations in history over the weekend — a 95 percent plunge,” reported Bloomberg. The official exchange rate for the bolivar went from about 285,000 per dollar to six million. This move, while significant, is in large measure simply a recognition of reality: Six million-to-one is the going rate for bolivars on the black market, and many businesses already list their prices accordingly.

Maduro also tried to buy support from the populace by raising the monthly minimum wage to 1,800 sovereign bolivars, or about $28. That, observed AFP, “is still not enough to buy a kilo of meat.” However, considering that it is a 3,500-percent jump over the previous level, it, along with a four-percentage-point hike in the country’s value added tax, will greatly increase the cost of doing business in Venezuela, which will hardly help its embattled economy.

The uncertainty surrounding the sudden policy changes was such that many businesses did not open Monday. Banks were closed while trying to apply the new currency rules to their ATMs and other electronic services.

All these policy changes are driven by the government’s desire to raise desperately needed revenue. According to AFP, “The fiscal deficit is almost 20 percent of GDP while Venezuela struggles with an external debt of $150 billion.” Maduro has stopped payments on most foreign debt, and creditors are trying to seize Venezuela’s foreign assets in payment.

Last week, Maduro also announced that only those citizens registering their vehicles for a “fatherland card” would be allowed to continuing buying fuel at greatly subsidized prices. While ending the subsidies, which have cost Venezuela $10 billion since 2012, would be a good idea, Maduro’s opponents are right to fear that the move is less about saving money and more about controlling the populace.

Controlling the populace, however, is Maduro’s modus operandi, as it is for all socialists. But unless Maduro becomes willing to cede this control, he may well end up presiding over a barren, depopulated wasteland — situated, ironically, on the world’s largest proven oil reserves. </s> Venezuela has launched a cryptocurrency backed by oil in an attempt to bypass tough economic sanctions imposed by the U.S. government. "The 'Petro' is intended to bolster the country's crumbling economy, which has been suffering from hyperinflation and devaluation for years," reports the BBC. "Venezuela claims it is the world's first sovereign cryptocurrency." From the report: </s> Caracas, Venezuela: Crisis-ridden Venezuela is launching an oil-backed cryptocurrency on Tuesday that it hopes will help circumvent US financial sanctions and resurrect the country's moribund economy.

The pre-sale of the "petro," which will represent a barrel of crude from a specific division in the country's Orinoco oil belt, started on Tuesday morning. Investors were offered US$60 "tokens" at discounted rates that they can exchange for petros during what is being dubbed an "initial coin offering," or ICO, in March.

"The petro is born," President Nicolas Maduro said in a video he tweeted late Monday. "We're going with force, and we'll achieve total success for the benefit of Venezuela and the happiness of our people."

Sceptics have expressed doubts that the currency will thrive, mainly because of lack of trust in a government whose debt is being renegotiated and whose policies have brought skyrocketing inflation. In addition, the country's once-thriving oil company, Petroleos de Venezuela S.A. (PDVSA), is producing at its lowest levels in decades.

Some critics also say the project does not make technical sense because the government will have too much space to manipulate the coin.

But proponents believe buyers may find the currency appealing since it is backed by a commodity and an administration with incentives to see it succeed.

Other cryptocurrencies have experienced considerable instability. The value of bitcoin, for instance, soared more than 300 per cent between August and December 2017, then plunged more than 50 per cent to its current level.

The first cryptocurrency officially launched by a government, the petro aims to offer a more stable option and may serve as an experiment for countries such as Russia. Moscow also faces US financial sanctions, and Russian officials have recently toyed with the idea of creating a "cryptoruble."

But many analysts are dubious that the experiment will succeed.

"It honestly sounds like they don't really understand how any of it works," Alex Van de Sande, a Brazil-based developer for the Ethereum Foundation, said in a phone interview.

"Unfortunately, that doesn't mean it won't raise money. We've seen terrible ideas that don't make any sense raise a lot of it," he said. "If I wanted to avoid international sanctions and make money appear out of thin air in my country hiding the origin, I guess this petro would be a useful way."

Jean Paul Leidenz, an economist at Ecoanalitica, a Venezuelan financial consulting firm, said he sees no chance that the project will inspire enough trust to substitute petros for the crumbling national currency, the bolivar, or even pay impending sovereign and PDVSA debts.

In many ways, it is designed to give the government enough space to manoeuver, he said. For instance, it is not clear whether or how buyers will be able to claim rights over the barrels of oil that back the currency, or whether the coins will work as bonds for which holders will be paid once they want to cash their money out.

"The government may still get millions of fresh dollars from Russian and Arab investors," Leidenz said. "But from that to succeeding as a currency? I don't think so."

Indeed, many issues may erode the petro's credibility. Venezuela's opposition-led National Assembly has called the project illegal, arguing that oil assets cannot, by law, be sold, and that the currency is a form of debt that has to be approved by the legislature. Maduro, however, has ignored the institution for years now.

The US Treasury Department also recently told Reuters that buying petros could be seen as "an extension of credit to the Venezuelan government," which could violate sanctions and expose US citizens to "legal risks."

But Mati Greenspan, senior market analyst at social trading network eToro, said in a phone interview that he thinks the petro does have good prospects.

"It's a milestone - an extremely exciting project that has a great chance of working, and is definitely better than continuing with the status quo," he said.

With confidence in the national currency at rock-bottom, the government hopes that backing a currency with a commodity on an open-source platform will engender trust and transparency, Greenspan said. "If Venezuelans adopt it and see it as a force of good, then the crypto community will be there in a flash," he said.

During the initial coin offering in March, the government plans to sell 82.4 million petros to the public at a discount from the official $US60 value. People will then be able to buy petros from those who obtained them during the ICO.

Under the plan, Venezuelans would eventually be able to use the petro to make payments to public institutions, including tax payments, according to official documents explaining the initiative. No more than 100 million petros will be created unless the "Superintendency for Cryptocurrency" approves making more after counting holders' votes, the documents say. </s> WASHINGTON (AP) — The Trump administration on Monday banned all use by Americans of Venezuelan cryptocurrency, saying that its introduction is intended to skirt U.S. sanctions.

In an executive order issued on Monday that took effect immediately, President Donald Trump declared illegal all transactions related to Venezuelan digital currencies, coins or tokens. The prohibition applies to all people and companies subject to U.S. jurisdiction. The move follows the introduction last month of a Venezuelan cryptocurrency known as the “petro,” for which the government says it has received investment commitments of $5 billion.

In the executive order, Trump said it was an “attempt to circumvent U.S. sanctions” imposed for democratic backsliding.

The Treasury had said in January that the petro appeared to be an extension of credit to Venezuela and warned that transactions in it may violate U.S. sanctions.

In February, cash-strapped Venezuela became the first country to launch its own version of bitcoin, the petro, in a move that President Nicolas Maduro celebrated as putting his country on the world’s technological forefront.

The petro is backed by Venezuela’s crude oil reserves, the largest in the world, yet it has arrived on the market as the socialist country sinks deeper into an economic crisis marked by soaring inflation and food shortages that put residents in lines for hours to buy common products.

Maduro had announced late last year that he was creating the digital currency to outmaneuver U.S. sanctions preventing Venezuela from issuing new debt.

Bitcoin and other digital tokens are already widely used in Venezuela as a hedge against hyperinflation and an easy-to-use mechanism for paying for everything from doctor visits to honeymoons in a country where obtaining hard currency requires transactions in the illegal black market.

The government has promised that Venezuelans will be able to use the $60 coins to pay taxes and for public services. But with the Venezuelan minimum wage hovering around $3 a month, it’s unlikely citizens will buy in large amounts.
The Venezuelan bolívar fuerte is replaced with the "Sovereign Bolivar" in an attempt to curb inflation. Venezuela announces that the new currency will be linked to the petro, a form of cryptocurrency operated by the country.