PETRO (part-2): 1st Country on Earth that Launched their Own Digital Currency

Petro, is the first digital currency promoted by the government in the world. It has been already introduced in several businesses such as in clothing, food appliances, household, perfumery and hygiene stores located throughout Venezuela. Many places are still missing but the implementation is going forward day by day.

For more background information on Petro and Venezuela, please go through PETRO Part-1 (link)

The backing of a currency is trust. An economic truth that is even more evident in the case of virtual currencies. $ 50 is $ 50 USD. Gradually, it seems to be that all the systems are being integrated into the PETRO. Trading can happen for instance in Hodl, a globally recognized cryptocurrency exchange, which accepts PETRO on their platforms. This enables several possibilities for usability, for example, the payment of wages.

It is hard for the Government to establish Petro’s price in the Petro App because they cannot have full supervision and control to do this. The national companies established a system where they devalued Petro at 50% of its value, which damages its usability. Additionally, Venezuelans have had many problems in the Petro App platform, since payments are not reflected when making purchases.

Image (maracaibo, venezuela) : David Mark

But, what is Petro?

Petro is a blockchain-based token supported by Venezuela’s natural resources such as oil, gold, gas and diamonds.

The value of Petro is 50% Oil , 20% Gold, 20% Iron & 10% Diamond.

This allows to help to strengthen and stabilize prices and wages in Venezuela. If you want to convert the value of Petro in other currencies in a conversion calculator you will get automatically the prices in: Bitcoin, Yuan, Dollar, Ruble and in Bolivar.

Petro seems to be an alternative to move away from the influence of the US dollar and to help the economy of Venezuela. The idea behind this is to ensure that this new financial asset will help to decrease inflation, increase production levels and ensure that there is not a constant rise in prices in comparison to the US Dollar.

The Government is the authority that dictates how and where Petro can be used. In fact, they urge that locally use of Petro in transactions is not voluntary, but compulsory.

The traditional currency, the Bolivar, is now being sacrificed to get Petro into wider usage. As a consequence, in theory Venezuela’s traditional currency will soon have less and less relevance in their national economy. However, the few Petro that have been traded in the crypto market have been sold up to 50% below the value set by the Government.

The implementation of Petro is speeding up rapidly. Nicolas Maduro, the president of Venezuela, is encouraging (and practically ordering) that employees working for Government entities and companies must get their payments in this virtual currency. Government in Venezuela has extended this to also apply for those international airlines that operate in Venezuela. Currently due to the Global Corona (Covid-19) crisis flights are not moving, but as soon as the traveling starts again, foreign airlines must purchase their petrol/airplane fuel in the country with this virtual currency as there won’t be any other alternative allowed to them. This applies also for maritime industry and leisure ferry travel, as the fees for procedures (such as permits) for foreign shipping companies to use the ports, are to be conducted via Petro.

Venezuelan government is equally the very first country in the world which starts exports and imports with their own Cryptocurrency. President Maduro has assured that Venezuela would pay Cuba in Petro for the services that its delegations provide in the country.

As the adaptation of the normal people and population of Venezuela has been lagging, the Venezuelan government has even started special training to educate their people. For example, they even offer Sing language explanations for those with hearing and language disabilities, to help them understand better the concepts behind crypto economics, blockchain, crypto-wallets and exchanges.

Public sources are biased due to the conflicts between the Government and opposition, but the information we have gathered online tells us that Venezuelans are feeling anxiety and uncertainty, because Petro has had very little impact so far internationally. Online criticism against Petro hurts their chances to trade in global context.

History will tell if Venezuelans will be successful with their project. It seems Venezuela is a social-economic laboratory of what could potentially work for other developing or sanctioned economies.

Regardless what the rest of the global cryptocurrency analyst and observer audience thinks about the Governments left- or right- wing direction, we should acknowledge that Venezuela has already made history as the first nation on Earth that took such brave steps towards new emerging finance.



Featured Image: Jeanmanzano