Aiming to get around financial sanctions led by the U.S., Venezuelan President Nicolas Maduro announced this past weekend his government is launching a cryptocurrency​ that is backed by oil reserves.

According to a report in Reuters, Maduro didn’t provide much in the way of details as to how the currency will be brought to market but did declare the country is getting into the 21st century with the new cryptocurrency. Maduro made the announcement during his regular Sunday broadcast that is televised around the country, saying the cryptocurrency will be backed by oil, gas, gold and diamond reserves. The new currency, dubbed the “petro,” will help Venezuela “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade,” he said in the address, reported Reuters. (See also: Winklevoss Twins Are Bitcoin's First Billionaires.)

The Bitcoin Bypass

Opposition factions in Venezuela immediately dismissed the idea pointing to the fact that he has a bad track record when it comes to monetary policy and noting that even if the petro was launched, it wouldn’t help the millions of Venezuelans who live in poverty and have a hard time even getting three meals a day let alone buying cryptocurrency. “It’s Maduro being a clown. This has no credibility,” said opposition lawmaker and economist Angel Alvarado to Reuters.

While it's not clear if Maduro will be able to pull the new digital currency off, it does underscore how the sanctions put in place by the U.S. are hurting the country’s cash movement efforts with international banks. Sources told Reuters that due to the sanctions, the compliance departments at banks are placing greater efforts on inspecting transactions tied to Venezuela, which has the result of slowing down certain bond payments and making it harder to sell some of its oil exports. The announcement also comes as bitcoin has been surging in price all year as digital currency in general becomes more legitimate. (Bitcoin started the year around $1,000  and is now worth $11,000.) The eventual entrance of the CME into the market with the launch of bitcoin futures in December and CBOE​’s plan to offer its own product in 2018 has contributed to a skyrocketing price. (See also: Can Futures Trading Solve Bitcoin's Problems?)

The move on the part of Maduro did raise eyebrows with some of the cryptocurrency's followers since it's not every day that a digital currency is backed by a government or central bank. But with currency controls in place in Venezuela for some years now, some of the country's tech-savvy residents have already been using bitcoin to get around the controls placed on dollars and to make purchases online, noted the report.



Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.