Maduro says Venezuela will issue $5.9 billion in oil-backed cryptocurrency

[Zorro]

President Nicolas Maduro said on Friday that Venezuela would issue 100 million units of its new oil-backed cryptocurrency in coming days, although it is unclear whether any investors will want to purchase the "petro" at a time when the OPEC member is going through a deep economic crisis and its leftist government has little credibility. Socialist Maduro surprised many last month when he announced the launch of the cryptocurrency, to be backed by Venezuela’s oil, gas, gold and diamond reserves, as a way to circumvent U.S. sanctions that have hurt Venezuela's access to international banks.

Maduro specified on Friday that each unit of the currency would be pegged to Venezuela's oil basket, which this week averaged $59.07 per barrel, according to the oil ministry. That implies the total cryptocurrency issued would be worth just over $5.9 billion.

There is much confusion, however, over how the mechanism will work. Opposition politicians have already panned the project as a fanciful idea doomed to fail and useless at getting food to the millions who are suffering from product shortages and the world's highest inflation. Maduro says the cryptocurrency will usher in the "21st century" and boost Venezuela's access to hard currency. "I have ordered the emission of 100 million petros with the legal sustenance of Venezuela's certified and legalized oil wealth," said Maduro in a state television address. "Every petro will be equal in value to Venezuela's oil barrel." Venezuela has the world's largest oil reserves, according to OPEC, and makes some 95 percent of its export revenue from oil. Critics say the government has squandered wealth from a decade-long oil boom and that without reforms any influx of resources will also be burned through. Strict currency controls have forced people onto the black market, on which a dollar can buy 137,000 bolivars. The country's strongest official rate, meanwhile, is 10 bolivars per dollar. That fall in value combined with money printing by the central bank is behind what many analysts are measuring as hyperinflation.

Local economic consultancy Ecoanalitica said prices rose more than 80 percent in December alone. Money supply, according to the central bank, was up more than 1,000 percent last year. Maduro said the cryptocurrency issuance would take place through virtual exchanges in the coming day, but did not give further details. Cryptocurrencies are decentralized and their success relies on transparency, clear rules and equal treatment of all involved.

https://www.yahoo.com/finance/news/maduro-says-venezuela-issue-5-9-billion-oil-013537526--finance.html

[PoliticAverse]

1. For some reason I think that will not end well. n/t

[DetlefK]

2. Here's what will happen. Step by step:

1. The cryptocurrency gets issued.

2. Speculators flock in, leading to a brief increase in value, followed by a sharp drop in value.

3. The value keeps swinging wildly up and down as speculators buy and sell.

4. Maduro blames the US for sabotaging the cryptocurrency.

[GatoGordo]

3. He hasn't issed a single coin, and he's already whinging.

I think there are various players who will milk this for a few quick bucks and then get out even quicker, but in reality, its is all smoke and mirrors. There is nothing behind this crypto-currency except bluster, and it is entirely illegal. It is predicted to be a failure of epic proportions by all who follow these sorts of things.

Maduro can't manage one currency, it is farcical to think that he can manage two. His feeble mind can't even wrap around the concept of VALUE.

[GatoGordo]

4. Petro lacks just about everything that is needed to function as a currency

Venezuela's Bitcoin: Is the cryptocurrency called 'petro' a damp squib?
Venezuela's government wants to launch a cryptocurrency this month, but analysts are not giving it much of a chance. Named “petro,” it lacks just about everything that is needed to function as a currency.

-snip-

...According to the economist Hanke, the Petro currency is doomed to failure, because the Venezuelan government is completely incapable of providing the promised raw material security. "They have no gold at all and they have no diamonds. They have a lot of oil reserves, but oil production is declining," he says.

Despite the world's largest verified oil reserves, the South American state is on the verge of bankruptcy. On Wednesday, the Wall Street Journal wrote: "Venezuelan government bonds have lost three-quarters of their value, reflecting a dozen defaults by the state-owned oil company." The alleged guarantees that are supposed to support petro are therefore non-existent....

-snip-

For the Venezuelan government, he has a simple tip if it really wants a stable currency: "Maduro should officially do what the people have done unofficially for a long time. He should get rid of the bolivar and replace it with the US dollar."

http://www.dw.com/en/venezuelas-bitcoin-is-the-cryptocurrency-called-petro-a-damp-squib/a-42057691

Venezuelas neighbors El Salvador and Ecuador currently use the US dollar as their official currency. Panama has used it as legal tender since 1904. But Maduro isn't concerned about a stable currency. He is concerned about staying in power.

"He would see this country burn if he could be king of the ashes."