Petro, the cryptocurrency launched by the government of Venezuela in February 2018, is being considered by Russia as a means of international transactions, according to the Venezuelan Foreign Ministry.
Venezuelan-backed Cryptocurrency Could Be Used By Russia
A Russian-Venezuelan high-level intergovernmental meeting taking place in Caracas is discussing a number of issues, including bilateral cooperation in the military area, railroad projects in Venezuela, and food production. According to officials of the Venezuelan Foreign Ministry, the Bolivarian Government of Venezuela is adding the cryptocurrency Petro to the conversation.
The meeting aims at strengthening the alliance between the two countries and the strategic partnerships between key companies, such as the Petromonagas project between Russian energy company Rosneft and Petroleos de Venezuela S.A. (PDVSA). Venezuela considers Petro as an opportunity to consolidate the strategic alliance and the trading relationship between the two countries.
According to Time magazine, there is evidence to suggest that the Venezuelan oil-backed digital currency was helped into existence by Russian officials, bankers, and businessmen. The theory is that Russia wants to use the currency as an experiment in dodging US sanctions placed against the Eastern power.
The oil-backed cryptocurrency had a month of presales before entering the market in March. According to Venezuela’s President Nicolas Maduro, Petro raised $735 million in the first day of its presale. The Bolivarian Government plans to use Petro in four “exclusive economic zones” in the country, in which it will be possible to use the cryptocurrency “for the sale of goods and services”, President Nicolas Maduro said in February.
Despite the launch of Petro as its own national cryptocurrency, there is growing demand for Bitcoin in Venezuela. In March, a new record was set for Bitcoin trading in Venezuela, with a total value of over 1 trillion Bolivares worth of BTC changing hands. The country is plagued by massive inflation, which forces the Venezuelan people to find secure ways of storing value.
Bitfinex, the Hong Kong-based cryptocurrency exchange, has recently refused to list ‘El Petro’, arguing that the digital currency offers “limited utility” and that listing the first ever state-issued digital currency “could be construed as an attempt to circumvent legitimate sanctions against the GOV.”
Venezuela is also preparing to launch another cryptocurrency, backed by gold and other precious metals. Like with Petro, cryptocurrency enthusiasts argue that a centralized government creating a decentralized currency defeats the purpose of the technology entirely. The United States government has warned investors that Petro appears to be an extension of credit to the Venezuelan government.
President Donald Trump issued an order prohibiting U.S. citizens from engaging in transactions using Petro as part of a campaign to pressure to the Venezuelan government. The Treasury Department called it “another attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.”