The petro -- Venezuela's government-issued cryptocurrency -- launches today

Venezuelan President Nicolas Maduro in July 2015. (Photo by Spencer Platt/Getty Images)

  • Pre-sale for the petro, a cryptocurrency issued by the Venezuelan government starts on Tuesday.
  • The cryptocurrency, first mooted in December, will be backed by oil, gas, gold and diamond reserves in the economically stricken nation.
  • It is effectively being launched to help Venezuela circumvent financial sanctions enforced by the USA and EU.

Venezuela’s government will launch the first sale of its commodity-linked cryptocurrency, the petro, on Tuesday.

The cryptocurrency, first mooted in December, will be backed by oil, gas, gold and diamond reserves in the economically stricken Latin American nation.

Tuesday’s launch comes in the form of a pre-sale, where potential buyers can sign up to get the petro when it officially launches. The token will attract investment from Turkey, Qatar, the United States and Europe, the country’s cryptocurrency regulator, Carlos Vargas, told reporters last week.

Venezuela will issue around 100 million petros, equivalent to around $US6 billion.

When the currency was first announced, Venezuela’s president, Nicolas Maduro said that it will help Venezuela to “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”

The cryptocurrency is effectively being launched to help Venezuela circumvent financial sanctions enforced by the USA and EU against the country as a punishment for its increasingly authoritarian regime.

“The Venezuelan government is looking to take advantage of one of the key features of cryptocurrencies – decentralisation,” Matthew Newton, an analyst at trading platform eToro said in an email.

“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.”

Initially, buyers will be able to use existing cryptocurrencies like bitcoin, as well as fiat currencies like the US dollar, to buy the petro. They will not, however, be able to use Venezuela’s currency, the bolivar.

The bolivar is famously weak after hyperinflation in recent years has left it virtually worthless.

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