Venezuela's New Cryptocurrency Targets Chink in US Economic Armor

Venezuela's New Cryptocurrency Targets Chink in US Economic Armor

Venezuela's New Cryptocurrency Targets Chink in US Economic Armor

Socialist President Nicolas Maduro late past year announced he was creating the digital currency to outmaneuver US sanctions preventing cash-strapped Venezuela from issuing new debt.

Venezuela is mired in a deep economic crisis triggered in large part by a fall in crude oil prices and a drop in oil production, which accounts for about 96% of the country's exports.

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).

President Nicolas Maduro blames the United States and Western institutions for waging "economic war" against Venezuela. "We won't help out a dictatorship that only cares about maintaining power on the backs of the Venezuelan people and their suffering", the party said in a statement.

Maduro was expected to announce further details with the digital coin's official launch Tuesday evening and has touted the petro as the fulfillment of the late Hugo Chavez's dream of upending global capitalism away from the dominance of the USA dollar and Wall Street. Opposition leaders have said the sale constitutes an illegal debt issuance that circumvents Venezuela's majority-opposition legislature, and the U.S. Treasury Department has warned it may violate sanctions levied past year. The government says it will be redeemable for other cryptocurrencies or state-backed currencies like the American dollar - though not in Venezuela's own struggling Bolivar.

And Venezuela's inflation rises faster in a day than it does in stable countries in a year, he said, adding that dreaming up a new currency alone isn't the answer. "The government has no plans of undertaking structural reform". It has reportedly already drawn investment from Turkey, Qatar, and other Middle Eastern countries.

The cryptocurrency will be stored in a virtual wallet users can acquire after registering online.

The presale was launched Tuesday and is planned to last into next month.

Prior to the launch, government advisers recommended that 38.4 percent of the petros should be sold in a pre-sale private auction at a discount of 60 percent.

Analysts say Maduro's government wants to bring forward the legislative poll for the same reason as the presidential election, to take advantage of divisions within the opposition coalition.

In theory, Venezuela's government will be able to use the petro to conduct transactions beyond what its meager foreign currency reserves can manage.

Yet questions remain about which network the token will operate within, given that one document released today highlights the ethereum network, while another, constituting a buyer's guide, cites an alternative blockchain system called NEM.

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