Lots of Cheering Now, but Will Venezuela’s New Crypto Cause Lots of Crying Later?

Venezuela’s leaders are celebrating their Petro launch, making the South American country the first to launch its own cryptocurrency. Now they wait to see how many investors they can wrangle into buying the token.

Well, they did it.

Venezuela held its presale of its Petro cryptocurrency on Tuesday, reportedly raising $735 million.

Now the real challenge for the financially-struggling country begins – finding more investors willing to put their money in a country plagued by economic and political issues.

While Venezuelan officials, including President Nicolas Maduro, have boasted that they will be able to attract billions of dollars’ worth of investments, skeptics are doubtful. But for now, proponents of this digital token called Petro, are basking and touting it as a success.

Let’s discuss.

Pomp and circumstance

To the surprise of few, Maduro had all the stops pulled out for the presale. It reportedly played out before a live studio audience inside the presidential palace. Attendees strolled down red carpets, while those who weren’t present were treated to hearing about it on a nationally broadcast show.

When he delivered his speech, Maduro had mining rigs in the background.

During the show, Maduro said:

“We have taken a giant step into the 21st Century. We are on the world’s technological vanguard.”

Krypto to take on Superman

It’s not lost on many that one of the main reasons Maduro was so determined to launch the Petro was to sidestep U.S. sanctions.

Maduro didn’t seem to hide from that belief either. He’s authorized payments in cryptocurrency for Venezuela’s consulate services and fuel on the border, reportedly saying, it is just the “kryptonite” Venezuela needs to take on Superman, which observers say is code for taking on the U.S.

Maduro said:

“Today, a cryptocurrency is being born that can take on Superman.”

Beyond all that jazz, little is known about how these cryptos will be peddled to investors because officials have not unveiled many details. One thing we do know now is that the Petro is supposed to be backed by the country’s oil, gas, gold and diamond riches.

Venezuela’s oil reserves include almost five billion barrels of oil. The Venezuelan government also pledged to provide cryptocurrency mining across the country.

Here’s a statement from Maduro about that:

“Every single Petro will be backed by a barrel of oil. We will set up a special team of cryptocurrency specialists so they will be engaged in mining in all states and municipalities of our country.”

One interesting detail that was revealed is Russia’s involvement. During a demonstration about the technology that will be put in place to support the Petro, it was revealed that a Russian company will run the platform.

Reuters reports that the Petro will not be a token on the Ethereum network, as was previously disclosed in a whitepaper provided by the government.

Lofty ambitions

During the presale, 82.4 million tokens were supposed to be offered. The country has in place lofty ambitions to issue 100 million tokens worth $6 billion. Observers have noted that kind of raise could net the cash-strapped, and debt-plagued country nearly $5 billion, which would make its ICO the largest ICO ever.

Petro holders can redeem the fiduciary money and other cryptos through so-called digital exchange locations.

Tuesday’s raise was done through a private sale. Next up is a public sale, and it is scheduled for March.

Questionable claims

The newly-appointed Superintendent of Cryptocurrencies, Carlos Vargas, reportedly said that the Petro token has attracted investors from many countries, including Qatar, Turkey and other Middle Eastern countries, as well as European nations and the U.S.

It’s the claim that U.S. investors are among the Petro buyers that is raising eyebrows. That’s because of the strict sanctions the U.S. has in place for the South American country over its government operating like a dictatorship, among other issues.

We told you about the U.S. Treasury Department issued a statement.

 “(It) is another attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.”

When the U.S. Treasury department saw that Maduro was hell bent on issuing the crypto, it sent a strong warning to U.S. investors to steer clear of it. The sanctions it has in place for Venezuela prohibit the purchase of newly-issued Venezuelan debt. The Treasury sees the Petro as an extension of credit to the Venezuelan government. Because of that, it could expose U.S. citizens to legal risks.

Even the country’s Parliament questioned the crypto move, and termed the currency illegal and unconstitutional.

What happens next?

What happens next boils down to whether the beleaguered nation can attract investors who are willing to pile in despite risks that go beyond the normal issues we see with crypto investments.

Venezuela’s president received a multitude of warnings about issuing the crypto, and he ignored every one of them. His determination, however, resulted in his country becoming the first in the world to launch its own crypto.

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