Venezuela, a country shattered by hyper inflation and US sanctions, says it has raised $735m in the first day of the pre-sale of its cryptocurrency, the petro.
President Nicolás Maduro tweeted late on Tuesday that the cryptocurrency reaffirmed the country’s economic sovereignty and celebrated the petro as a “big solution” to Venezuela’s ills. The launch of the petro comes as Venezuela suffers one of the worst economic crises in Latin American history.
A grandes problemas, ¡grandes soluciones! Desde el primer minuto el juego arrancó bien, y arrancamos ganando: 4.777 millones de yuanes o 735 millones de dólares es el resultado inicial de las operaciones de intención de compra del Petro. #AlFuturoConElPetro pic.twitter.com/LoaDgj4rr1
— Nicolás Maduro (@NicolasMaduro) February 21, 2018
The Venezuelan economy has shrunk by about a third over the past five years and the IMF expects gross domestic product to shrink by a further 15 per cent this year. The IMF forecasts an eye-watering inflation rate of 13,000 percent for 2018.
The petro is backed by the country’s vast oil reserves and a white paper on the cryptocurrency said 100m petro coins will be issued. Of that, 38.4m will be sold through a pre-sale at the reference price of $60. The pre-sale runs until March 19. A further 44m coins will be sold through an initial offer starting on March 20 with the same reference price, while the country’s Superintendency of Currency and Related Activities will retain 17.6m tokens.
Venezuela will accept the petro as payment for taxes, fees and public services, according to the white paper.
Not only is this a world first in terms of a country issuing it’s own cryptocurrency, it is also taking Venezuela and to some extent the world into uncharted waters as it breaks the stranglehold the US dollar has had over the pricing of oil around the world.
Last week there was another significant move towards pricing oil in another currency when the it was announced that China is set to launch its first ever crude oil futures contract in late March on the Shanghai Futures Exchange.
The move had been scheduled to take place in 2012 but was delayed due to market turbulence. The contracts will be priced in China’s currency the yaun, giving rise to what many commentators are calling the “petroyuan”.
Three major oil producing nations, Russia, Iran and Venezuela have been trying to move away from the U.S. dollar for several years, mainly due to the effect U.S sanctions and bank account freezes have had on their economies. Saudia Arabia has also come under pressure from China to accept payment in Yuan for their exports to China which has now become the worlds biggest importer of oil.
The combination of these moves could have far reaching consequences for the US and the dollar, upsetting a status quo that has existed since the Second World War.