What Is Petro Gold?
The term Petro Gold refers to a cryptocurrency established by the government of Venezuela. The currency was launched in February 2018 and is backed by precious metals, notably gold. The cryptocurrency's launch followed another, similar offering. Simply called Petro, it was to be pegged to the value of oil. According to the petro website, the country's cryptocurrencies use blockchain technology and are regulated by the nation's cryptocurrency watchdog, SUNACRIP.
- Petro Gold is a state-issued cryptocurrency announced by the Venezuelan government in early 2018.
- The cryptocurrency was launched after the country established Petro, its first cryptocurrency.
- Petro Gold was meant to be a gold-backed cryptocurrency.
- Critics state the use of a state-issued cryptocurrency appears to be a ruse to evade international sanctions against Venezuela for human rights violations.
- The U.S. government banned all transactions for these cryptocurrencies.
Understanding Petro Gold
Petro Gold was the second cryptocurrency announced by the Venezuelan government. After the first state-issued cryptocurrency, Petro, appeared to be a farce, President Nicola Maduro announced a second token in early 2018, which he called Petro Gold.
Venezuela claimed that Petro (again, not Petro Gold) attracted 171,000 certified purchase orders, valued at $735 million, on the first day of its pre-sale on Feb. 20, 2018. The government claimed that its value would be pegged to the value of a barrel of Venezuelan oil. However, it later became clear that the oil allegedly backing each token had yet to be drilled at the time the cryptocurrency was announced.
Petro Gold’s value was set to be pegged to the value of gold and other precious metals. It was unclear if this peg was to be linked to gold produced in Venezuela or gold within the country’s reserve.
Venezuela's digital currencies can be used through digital wallets, payment systems, and through exchanges. Users must first create a wallet through PetroApp before they can begin. The currency can be used for payment to participating businesses or it can be exchanged to purchase other cryptocurrencies and fiat money. Platforms that support transactions for the petro are PetroApp, Vex, Patria, and Banco de Venezuela. According to the website, the currency is suitable to invest or for savings.
Although Petro (the first cryptocurrency) was launched in November 2017, it does not appear to be in wide circulation in Venezuela even though Maduro promised it would be the cornerstone of the country's economic recovery. Venezuela is still in the throes of an extreme economic crisis, as a result of a combination of overspending, a drop in oil prices, and political unrest.
In January 2021, the annual inflation rate in Venezuela eased to 2,665%, according to the Central Bank. Although not as high as it once was (it was estimated to have gone higher than 25,000% in 2019, amid continuing shortages of staple goods and growing civil unrest), the country's inflation rate remains elevated as a result of the continued depreciation of the bolivar due to the global pandemic and a lack of national oil production. The government announced an annual inflation rate of 686.4% in 2021.
Venezuela needs hard currency, especially dollars, in order to pay creditors. Requiring dollars and other non-bolivar currencies in exchange for Petro Gold is a sign that investors will face even more risk than they would if they purchased other cryptocurrencies.
The constant drive to find better returns may result in investors still taking a chance. The Petro (again, not Petro Gold) pre-sale reportedly included investors from countries in the Middle East, Europe, and the United States. The U.S. Treasury Department warned that holding Petro and Petro Gold violates sanctions, and being caught can be catastrophic for financial institutions.
Criticisms of Petro Gold
The Petro Gold announcement marked further efforts by the Venezuelan government to circumvent economic sanctions placed on it by the U.S. and other developed countries. In fact, the U.S. Treasury Department claimed that Venezuela’s cryptocurrency potentially violates international sanctions.
Sanctions against Venezuela were enacted in response to the deteriorating political situation in the country. Fearful of being pushed out of power, Maduro turned to jailing opposition leaders and circumventing democratic institutions.
Skeptics pointed out that the rampant inflation of the bolivar, Venezuela's collapsing economy, and growing debt problems made it highly likely that the government would be willing to manipulate its cryptocurrencies' values. They also felt this would leave little recourse available to token holders.
Do not confuse Petro and Petro Gold with the PetroDollar, another cryptocurrency that trades under the symbol XPD.
Future of Petro Gold
In 2019, Maduro launched a campaign to speed up the country's adoption of Petro. In a tweet on July 3, 2019, he said, "I give the express order to open El Petro transaction ticket offices in all Banco de Venezuela agencies." The order came on the heels of an initiative to give away one million cryptocurrency wallets with a small amount of Petro in them to young Venezuelans, in addition to education about how cryptocurrency works.
In December 2019, Venezuela paid government workers and pensioners at least partly in Petros. In another tweet, Maduro said, "The Petro is a marvel and a miracle that reaches our workers and retired workers of the country in order to make their purchases. It is a unique and extraordinary new experience of our economy. We are an example to the world!"
If the Petro, and to some extent Petro Gold, is to be successful, other governments that face economic sanctions may seek to offer their own versions. Countries whose economies are linked to the extraction of natural resources, such as oil, natural gas, or minerals, are the most likely candidates.
The government signed a new tax agreement in 2020, allowing it to start collecting taxes and fees in Petro.
Cryptocurrency in Venezuela
A 2020 Bloomberg report revealed that Venezuela's central bank was formally testing whether it could hold cryptocurrency, including Bitcoin and Ethereum, in its reserves. A state-run oil company, Petroleos de Venezuela SA, requested that it be able to pay its suppliers with either Bitcoin or Ethereum.
On Sept. 29, 2020, Maduro claimed that Venezuela was going to use cryptocurrency in both domestic and global trade, as part of the country's efforts to recover from U.S. economic sanctions, which have crippled the country's ability to trade with the rest of the world.
The country's efforts to use its national cryptocurrency for this purpose have been mostly unsuccessful. However, the use of Bitcoin in the country has become more widespread, with data from Coin Dance showing right at $7 million worth of Bitcoin is traded peer-to-peer each week.
What Is Venezuela's Cryptocurrency Called?
Venezuela launched two cryptocurrencies. They are called Petro and Petro Gold. The former is reportedly backed by oil while the latter is said to be backed by gold and other precious metals.
How Do You Purchase Venezuela's Cryptocurrencies?
According to the website, people who are interested in trading petros must create a digital wallet. Users can begin trading the cryptocurrency as soon as they are registered.
Can U.S. Citizens Trade Petro and Petro Gold?
The U.S. government banned any and all transactions within the country in Venezuela's cryptocurrencies in a move to boost economic sanctions against the South American nation. U.S. officials said President Nicolas Maduro launched these cryptocurrencies as a way to work around sanctions that were already in place.
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