Venezuela Launches Virtual Currency, Hoping to Resuscitate Economy

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Opt out or contact us anytime Mr. Maduro will be running for re-election in the April race, and with his government in control of the electoral machinery and the highest court, he is expected to win. But the United States, Colombia and other countries have already declared that they will not recognize the results. Ms.…

Opt out or contact us anytime Mr. Maduro will be running for re-election in the April race, and with his government in control of the electoral machinery and the highest court, he is expected to win. But the United States, Colombia and other countries have already declared that they will not recognize the results. Ms. Arnson said the introduction of the currency could provide a political lift to Mr. Maduro’s re-election ambitions.

“Looking like you’re doing something to save the economy, that goes beyond paying off your foreign creditors, is an important part of the electoral strategy,” she said.

“But I think this is fantasy-land in terms of being an economic life jacket.”
Advertisement Continue reading the main story The Venezuelan government’s petro initiative is one of the wildest outgrowths of an explosion in activity around virtual currencies over the last year. Inspired by the skyrocketing price of Bitcoin in 2017, many entrepreneurs raised money by creating and selling their own virtual currencies in so-called initial coin offerings. Many governments around the world have also been examining whether it would make sense to issue their own electronic currencies on something similar to the network that Bitcoin runs on, with the Bank of England and the People’s Bank of China announcing experiments. Russian government officials have also discussed issuing some sort of crypto-ruble, to evade American sanctions. But no government has moved ahead more swiftly, and with more abandon, than Venezuela. The documents that have been put out by the Venezuelan government suggest that the petro’s release will be similar to the offerings done by private companies.

The petro white paper said the process would begin with a presale of digital tokens, to gauge demand, and then be followed by an “Initial Coin Offer,” with 82 million petros released to the public. The petros are then supposed to be tradable on virtual currency exchanges around the world, the white paper says.

A petro website says the Venezuelan government will accept the petro for tax payments and fees. Mr. Maduro directed the state oil company, PDVSA, and other public companies to handle a percentage of their sales and purchases in petros. Coin offerings have been attractive to entrepreneurs because investors can send their money using Bitcoin or other existing virtual currencies, which do not go through banks or other institutions that could decline the transactions. The movement of money outside of the traditional banking system has allowed coin offerings to go ahead even though American regulators have said that most of them are probably violating the law .

Advertisement Continue reading the main story The same structure could be beneficial to Venezuela, given that it is facing American sanctions that have made it hard to raise money through established channels. For investors, though, the petro may be a hard sell, given that the system will be designed and controlled by the Venezuelan government, which has not been the most reliable financial player. The design of the petro, while clearly inspired by Bitcoin, would, in some ways, be the opposite of most virtual currencies like Bitcoin, which are designed to operate without any central government or authority in charge.

Bitcoin has largely won over investors because there is no central authority that could suddenly change the number of Bitcoins to be released, or the rules of the network. With the petro, on the other hand, the confidence of investors is likely to be only as strong as their confidence in the Maduro government.
Kirk Semple reported from Mexico City, and Nathaniel Popper from San Francisco. Ana Vanessa Herrero contributed reporting from Caracas.

A version of this article appears in print on February 21, 2018, on Page A7 of the New York edition with the headline: Venezuela Begins Gamble to Save Economy With a Virtual Currency Backed by Oil. Order Reprints | Today’s Paper | Subscribe.

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