Venezuela’s plan to issue “petro-coins” has become even more worrying

nThe runaway commentary: Venezuela’s oil-backed petro, a cryptocurrency-boosted news release, is alarming to many experts who have questioned the Venezuelan government’s ability and the purpose of the move. Because the President of Venezuela has made it very clear that it hopes to evade the economic sanctions of other countries through this currency, many who seek to legalize this new technology do not quite agree with this vision.n
nTranslation: Inan
Cryptocurrency, backed by oil, is a phenomenal first and will be even more powerful if the currency is still backed by the government.n
However, while Venezuela has declared that it intends to issue the cryptocurrency entitled “petro” and accomplishes both of these feats, experts doubt whether it is capable or adequately equipped to achieve its goals.n
Stephen McKeon, a professor of finance at the University of Oregon, points out that one of the main questions Petro will meet is – is it realizable, that is, physical delivery?n
The role of any currency (whether tangible or digital) supported by a commodity is that the holder must believe that they can exchange for the real good. For example, when the United States uses gold as a standard, people can take their own dollars to banks to exchange physical gold.n
Venezuelan President Maduro said each petro is worth about one barrel of oil, and he also specifically designated oil from Block 1 of Ayacucho Block, the Orinoco heavy oil belt of Venezuela, where oil reserves exceed 50 Billion barrels.n
However, McKeon pointed out that there are many risks to this practice in Venezuela because of the lack of relevant laws and regulations and the drop in oil production. If Venezuela failed to deliver oil, what about the holder’s recourse?n
Joshua Satten, a blockchain partner at Wipro, also questioned whether the Venezuelan government was sound enough to instill confidence in petro’s potential miners and holders.n
Other countries are studying the possibility of issuing official cryptocurrencies. Sweden is studying the possibility of electronic krona, Singapore considering its own digital currency, Estonia intends to issue “estcoin.”n
However, no other country has made the same rapid progress as Venezuela. Maduro has made it clear that the move aims to help Venezuela to avoid the United States, Canada and the EU sanctions and ease the country’s economic difficulties.n
Venezuela now trades at around $ 50 a barrel, while WTI trades at about $ 61. (Venezuela’s low oil prices are due to heavy oil and high sulfur content.)n
Even so, 100 million barrels will bring about 5 billion U.S. dollars in revenue.n
Although blockchain experts question petro, they also think there will soon be many digital assets backed by assets. In fact, the Royal Mint has started to develop a digital currency backed by gold.n
Satten also has many technical doubts about this plan by the Venezuelan government. “They have not said what the plan is based on to create the currency, or do they want to write their own agreement?” Satten also questioned their ability to maintain security.n
More answers may be revealed on January 14, and Maduro will meet with all those who want to monetize that currency on that day. It is reported that some technical details will be announced on the same day.n
Another problem is that, unlike gold, oil, an asset like this, will eventually disappear. Satten asks, “How are they going to stop the circulation then?”n
The Venezuelan Government has clearly stated that it wishes to do away with the sanctions, which troubles those who want to legitimize the blockchain. Finally, Satten said Venezuela is trying to achieve not a cryptocurrency, but “a digital bouncer that bypasses the global financial system is a bit scary and very worrying.”n

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