Venezuelan President Nicolás Maduro has announced that the national oil-backed cryptocurrency, the Petro, will be used as a unit of account within the country, news outlet ABC International reported August 14.
Nicolás Maduro reportedly announced in a television address, that the state oil company PDVSA will use the Petro as a unit of account. Additionally, the government will introduce a new salary system and a pricing system for goods and services that are anchored to the Petro. ABC quotes Maduro:
“As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the Petro. It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”
According Maduro, the implementation of a new Petro-based salary and pricing system “will mean a substantial improvement in the income of the workers" and will help "the maximum retail price to reappear."
Starting August 20, Venezuela will have two government currencies, the Petro and sovereign bolivar, the latter of which will be indexed to the former. The sovereign bolivar will take five zeros away from the current national currency, the bolivar fuerte, in an eventual monetary reconversion.
The Central Bank (BCV) will reportedly “begin to publish the official figures of the value of the sovereign bolivar according to the Petro and the value of the petro according to international currencies." Maduro also said that the BCV and private banks in the country have already received the new banknotes.
The Venezuelan government launched the pre-sale of the Petro in February, with 82.4 million of the world’s first national oil-backed cryptocurrency available at that time. The country introduced the currency in an attempt to attract foreign investors and skirt U.S. and E.U. sanctions, as well as overcome catastrophic hyperinflation which is projected to hit 1,000,000 percent in 2018.
According to the Petro whitepaper, the cryptocurrency fully complies with Venezuelan legislation, though the opposition in the National Assembly publicly claimed that issuing Petro was illegal.
While some parts of the document lack fine details and others are not backed by any sufficient arguments, there are some clear economic use cases. Paying taxes and other settlements with state bodies would be at least 10 percent cheaper with the Petro, which is planned to be expanded into other payment markets in the future.
The whitepaper says that the Petro can be be easily converted into U.S. dollars and other currencies, which will help Venezuela in export trade. Still, there’s a possibility that it could be purchased with funds that were received illegally at crypto exchanges or privately, and then exchanged to oil that can be ‘laundered’ and documented to eventually be sold through above-board business practices in various jurisdictions.