One of the reasons the Venezuelan government came up with a state-backed cryptocurrency was the prolonged economic stagnation in Venezuela, combined with high inflation, expected to hit the 13,000% mark in 2018 by the International Monetary Fund.
According to the Whitepaper, El Petro will be a helping hand to Venezuelan economy, replacing the dying, if not already dead, domestic Bolivar with a liquid cryptocurrency that is backed by a finite resource, Venezuelan oil. The Venezuelan central bank recently announced that its DICOM exchange rate would be at 30,987.5 bolivars per euro. DICOM is the country’s only official exchange rate, though on the black market a dollar is worth around 230,000 bolivars.
Given such conditions, the launch of the coin is nothing less than an attempted emission a new national cryptocurrency collateralized by "potential" oil reserves.
In the case of el Petro, even if launched successfully, it seems unlikely to have a positive impact on Venezuela’s ill economy. First of all, a large part of the supply will remain in the hands of the government, a notion that is somewhat contradictory to the cryptocurrency ideology. As such, the cryptocurrency will remain strictly centralized, leaving a lot of room for corruption and consolidation of power.
Opposition leaders have said the ICO constitutes an illegal debt issuance that circumvents Venezuela’s majority-opposition legislature, and the U.S. Treasury Department has warned it may violate sanctions levied last year.
Harry Colvin, director and senior economist at Longview Economics, expressed his disbelief on the potential success of el Petro. According to CNBC Colvin stated:
"Venezuela has been known for misappropriation of assets in the past and the central bank has just created hyperinflation so I imagine there'll be trust and transparency issues. If President Maduro loses the election in April then petros would probably be made illegitimate."
On the same topic, Matthew Newton, Analyst at eToro, said:
“Through ICOs, cryptocurrencies have shown that start-ups have been able to circumvent traditional finance and fundraising by reaching a global audience through technology and pitching their ideas directly. With Petro, we are witnessing this opportunism on a much grander scale, and the first of its kind. Other sanctioned nations will be watching closely as Petro could set a precedent.”