Venezuela launches its controversial oil-backed cryptocurrency, the petro

Courtney Goldsmith
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Nicolas Maduro is the president of Venezuela (Source: Getty)

The Venezuelan government has launched its new cryptocurrency, the petro, as the country struggles amid US sanctions and soaring inflation.

Venezuelan President Nicolas Maduro first announced the controversial digital token late last year as a solution to the country's economic woes, however the US Treasury has warned potential investors that buying the petro could violate sanctions that prohibit the purchase of Venezuelan debt, which could dent investor sentiment.

The petro is backed by Venezuela's vast oil reserves, with Maduro previously saying he would issue 100m tokens backed by 100m barrels of oil, giving the digital coin a market value of about $6bn (£4bn). Today, about 82m tokens were initially made available.

“With the Venezuelan bolivar suffering from hyperinflation and the type of volatility usually reserved for the crypto markets, the petro appears to be an attempt to raise much-needed foreign capital. If it does prove a success, expect other governments to quickly follow suit," said Dennis de Jong, managing director of UFX.

"If petro becomes a valuable coin, it would really open the doors for other countries to use the same format and raise funds," added Naeem Aslam, chief market analyst at Think Markets.

However, petro’s success could bring about another round of regulatory crackdowns on digital currencies.

"In our view, if petro goes ahead and the Venezuelan government manages to raise a considerable amount from investors, this could bring more international scrutiny from regulators," said Matthew Newton, analyst at eToro.

Read more: Venezuela's ironic cryptocurrency distraction: the flaws of the Petro

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