Last year, Bolivarian Republic of Venezuela´s government officials announced the launch of a crypto coin, the “petro”, intended to by-pass the economic and financial blocking imposed by the U.S. Administration and the European Union sanctions to the Venezuelan government.
This sanction has caused Venezuela the loss of its correspondent banking account abroad, making it difficult to satisfy the country’s liabilities, not because of a lack of money but the reluctance of international banking to render intermediation services out of fear to be sanctioned as well.
Therefore, it is wise to keep in mind these following aspects of the petro if you are considering using this Sui generic crypto asset.
1 Financial Support
According to Venezuela´s government officials, the petro is supported by the country´s natural resources reserves on oil, gas, gold, diamond and other precious minerals. Nevertheless, as a general rule crypto coins don’t have physical support, it rely on trust, which in these case means the willing of economic factors to use any crypto coin as a trade value. Nonetheless, it is not yet clear how this support it’s going to influence or “back” the petro´s value, and given the economic unsteadiness of the country, how the actual crisis will hit its profit-earning capacity.
2 Legal Nature of the So-Called Support
It is necessary to realize that under Venezuelan legislation, the natural resources certified reserves cannot be offered as a warranty of public indebtedness. The only way to generate public debt it is through the indebtedness laws, which needs the approval of the Venezuelan National Assembly, otherwise there it is a high probability that such debt it could be as well considered illegal, and affect the “trust” issue.
3 The Real Concern
If, as announced by Venezuelan authorities, each petro represents a contract on an oil barrel or any other commodity part of the petro´s support basket, it might be considered public indebtedness. if that is so, the petro could get into the sphere of sanctions imposed by the U.S. Administration, under the executive order that put a ban on bonds and stocks issued by the Venezuelan government.
In these case scenario, it would be wise to wait a little bit before investing a nickel on this new yet controversial crypto coin.