In a first, Venezuela launched state-backed cryptocurrency called “petro” as a legal tender. Nicholas Maduro, The Venezuelans President, was more than excited to announce the birth of “petro.” The country is which already in deep slumber of the economic crisis is hoping to raise millions by the sale of the cryptocurrency.

‘Petro’ is backed by the oil reserves and commodities like gold, diamond. As per the official statements from the Venezuelan government, the cryptocurrency evolved from an idea by Hugo Chavez, who anticipated a cogent currency that was backed by commodities.

The basic intent behind the launch of this new currency is to adjunct the already existing Venezuela’s Bolivar Fuerte (VEF) currency and to actually overcome US & EU sanctions. Petros will be produced and controlled by the Venezuelan government. The country has administered almost five billion barrels of oil to support its newly administered currency, which will be moored to the cost of one barrel of oil.

The First Official Cryptocurrency Backed By the Venezuelan Oil Reserves

As the government announced a sale of petros, is it is being sold in cryptocurrencies and other hard currencies. So, this is how each petro will be backed by one barrel of oil, thus determining the price for the petro. Although almost a 100 million petros are to be released, the government will initially start with the disbursement of only 82.4 million petros.

This digital currency has invited a lot of criticism both within and outside the country. Opposition-controlled congress in Venezuela is up in arms as many blame it to be illegal and serve as an easy road for corruption. The US has also warned that buying of petrol is a direct violation of sanctions against Venezuela, which already prohibits the purchase of any newly issued debt.

Petro and the Problem with Legality

The currency, as one would expect, comes with a manual, which explains how the users can set up digital wallets and even with a warning about the wallet security. One more document is the internal control manual which calls for the control on money laundering and prevention of financing for terrorism.

This manual also offers some insight on the blockchain that will be used for petros. Petros, according to the document will exist as a token on top of etherum. The presale of this new digital currency officials started from February 20, 2018. The sale will be processed as an ERC20 token on the etherum platform.

Only time will tell what the future holds for the new Venezuelan Currency as it continues rolling out.