DEFINITION of 'Petro (Cryptocurrency)'

Petro is a cryptocurrency proposed by Venezuelan President Nicolas Maduro in December 2017. The value of petro would be based on the country’s oil, natural gas, and mineral reserves.

BREAKING DOWN 'Petro (Cryptocurrency)'

The announcement of the proposed new digital currency comes on the heels of a rapid rise in the value of Bitcoin. The Venezuelan government’s expectation is likely that the financial community will consider petro to be an investment opportunity, with strong demand keeping the currency stable at a time when the value of country’s official currency, the Bolivar, has plummeted due to high rates of inflation. An unstable currency has made it more difficult for Venezuela to service its debts.

Venezuela has one of the world’s largest oil reserves, but after years of financial mismanagement and political turmoil the country’s economy is in free fall. The low price of oil – a commodity that accounts for half of the country’s GDP - has severely damaged the country’s ability to pay back international creditors, and the country has flirted with bankruptcy in recent months. High rates of inflation, coupled with shortages of many basic goods due to price controls, has sapped the country’s productivity and sent the economy into a prolonged recession.

International observers believe that the primary impetus behind the announcement of petro digital currency is to circumvent U.S.-led sanctions. These were levied in response to the deteriorating political situation in Venezuela, with the government failing to hold free and fair elections, undermining democratic institutions, and imprisoning leaders of the opposition. The sanctions prevent the country from being able to readily use international financial institutions, which now have to heavily scrutinize the source of funding in order to be in compliance. This may result in payments being delayed and the country going into technical default, as it did in November 2017 when payments to government bondholders were made late.

Cryptocurrencies have been criticized by some in the international community as a tool for individuals to launder illicit gains by bypassing currency controls and regulations. The United States, for example, has sanctioned several prominent politicians and business leaders in Venezuela for their expected involvement in the sale of drugs and the suppression of democracy. If petro is made official it could allow sanctioned individuals to move money out of the country by. This would be done by purchasing petros, selling petros for a more stable currency such as the dollar or euro, and then depositing those currencies outside of Venezuela.

The announcement of petro puzzled proponents of cryptocurrencies. Part of the popularity of cryptocurrencies such as Bitcoin is that they had not, up until this point, been issued by governments. Having the government directly control the digital currency not only goes against the founding principles of the cryptocurrency movement, but may also undermine the value of the currency. Before buying into petro, investors would have to know how its value is calculated and how trustworthy it would be. Because the government is not considered trustworthy or stable, investing in petro would likely be a risky proposition.



  1. Petro Gold

    Petro gold is a cryptocurrency announced by the Venezuela government ...
  2. Soft Currency

    A soft currency is one that's value is inherently weak and not ...
  3. Key Currency

    The currency used as a reference in an international transaction ...
  4. Trade Sanction

    A trade sanction is a trade penalty imposed by one or more nation ...
  5. VEB (Venezuelan Bolivar)

    The currency abbreviation for the Venezuelan bolivar (VEB), the ...
  6. Transfer Risk

    The risk that a local currency cannot be converted into the currency ...
Related Articles
  1. Tech

    Venezuela's Petro Isn't Oil-Backed. It's Not Even a Cryptocurrency (Opinion)

    The petro, Venezuela's proposed cryptocurrency, is a farce.
  2. Tech

    Venezuela and Russia Are Collaborating on Cryptocurrency

    Russia may play a role in the Venezuelan government's new cryptocurrency, the petro.
  3. Tech

    Venezuela Claims To Have Pre-Sold $735 Million of Petro Cryptocurrency

    Venezuela claims that the pre-sale of its dubious oil-linked cryptocurrency, the petro, drew $735 million in one day.
  4. Tech

    Venezuela Urges 10 Latin American Nations To Adopt Its Cryptocurrency Petro

    Venezuela wants its oil-backed cryptocurrency, the Petro, to serve as an integration currency in South America.
  5. Tech

    Venezuela to Launch National Cryptocurrency: The Petro

    Cash-starved Venezuela will soon issue the world’s first national cryptocurrency called the Petro.
  6. Investing

    Venezuela Unveils Oil-Backed Cryptocurrency

    President Maduro announced the 'petro,' a new cryptocurrency backed by the country's oil reserves.
  7. Financial Advisor

    Oil Is Cheaper Than Bread In Venezuela...The Country Is In Chaos (BAC, TAPR)

    Venezuela is floundering, and the story has more to do with just the falling price of oil.
  8. Investing

    Venezuela Economics: 4 Reasons Why This Country May Go Under

    Find out the reasons behind Venezuela's economic woes and why many economists believe it is headed for collapse in the coming year.
  9. Investing

    Oil Prices Could Spike $10 as US Sanctions Odds on Venezuela Increase

    Political turmoil in Venezuela could force U.S. hand and put pressure on oil prices.
  10. Investing

    Venezuelan Hyperinflation Leads to New Currency

    The continued inflation crisis in Venezuela has prompted the country's central bank to issue new denominations of its currency.
  1. What is foreign exchange?

    Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
  2. How do changes in national interest rates affect a currency's value and exchange ...

    Generally, higher interest rates increase the value of a given country's currency, but Interest rates alone do not determine ... Read Answer >>
  3. What are key economic factors that can cause currency depreciation in a country?

    Read about the causes of currency devaluation, and find out how to differentiate between relative and absolute currency devaluation. Read Answer >>
  4. How are international exchange rates set?

    International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency ... Read Answer >>
  5. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Answer >>
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center