Petro Cryptocurrency: Five Reasons to Stay Away
The Petro, a promised oil-backed crypto coin, starts to raise more and more red flags.
The Petro, the intended national cryptocurrency of Venezuela, claimed a successful pre-sale launch on February 20, and allegedly drew in more than $735 million. The amount is phenomenal for an ICO, although it may be quite inadequate in saving a failed state. However, according to critics, the money may be just enough to fuel the next election and secure Nicolas Maduro for one more term as president.
To help its collapsing economy? Sorry to break it to you @CNNi but the #Petro is about 4 things: 1) money laundering 2) emptying what is left in Venezuelan public coffers 3) coming up with money to finance Maduro’s campaign and 4) circumventing sanctions against corrupt officials
— Melissa Marchand (@MeliSMarchand) February 20, 2018
Venezuela Preps Gold-Backed Cryptocurrency in Petro Wake
But even with the high hopes of the Petro, and the promise the coin would be tied to the value of oil on the international markets, there are reasons to stay away.
- The Petro has not been created: Usually, creating a token and starting some form of distribution is the first thing done after an ICO. Even projects with small teams manage to generate a token and distribute it. Not so with the Petro.
This lack of organization is worrying – after all, the Petro has also promised it would have its own main net, and the initial token would be just a placeholder. But even better-organized projects with dedicated teams have struggled to build a network, so why should one expect a failed state to perform better?
Sounds like the #petro ‘launch’ has been shambolic?
— Stacy Herbert (@stacyherbert) February 21, 2018
- There may be Petro scams: At this moment, there is no official message about which digital asset is actually the Petro. Initially, the Venezuelan coin – in fact, a token, was supposed to be a standard ERC-20 token. Then, the project switched to the NEM network, and even claimed an official approval on behalf of the NEM Foundation. There is one NEM token generated that claims to be the Petro – with no way to tell if it is really the promised asset.
The NEM team seems to be distancing itself actively from the Petro project:
1/ Regarding the Petro project, NEM is open source + hence any projects built on NEM are not under our control. To be clear, the NEM Foundation is not directly involved with this project and we’re not in a position to control any open source projects. pic.twitter.com/XQ3XqYg0Ou
— Inside NEM (@Inside_NEM) February 21, 2018
- The exchange rate may be unfair: it is questionable whether exchanges would dare to list the Petro and trade it freely. Listing an asset on an exchange requires good communication between the founding team, or at least a transparent technology so the exchange can carry the asset safely. In the case of the Petro, it is unknown who would petition exchanges, or raise funds for the listing.
Investing in #Petro is a sure way to lose all your money. Like burning it. At least if you burn your money you don’t finance a repressive dictatorship. – D. Lacalle
— Crypto Skipper (@Crypto_Skipper) February 22, 2018
Taking a cue from the previous attempt to launch a coin, this time a grass-roots effort, we can look at the BolivarCoin. For now, the coin trades very thinly chiefly on Cryptopia and Yobit, niche exchanges with a rather bad reputation.
With the Petro, which has seen more efforts to promote as the country’s salvation, no one knows the potential exchange rate, which may in fact be manipulated by the government.
- It may be illegal: At least for US citizens, it may be illegal to try to trade the Petro, based on the set of sanctions for the country. But it may land European users in hot water as well. Granted, there have not been any restrictions or punishments for trading DogeCoin with Venezuelan traders, a crypto coin which has been widely used to replace the inflationary Bolivar.
- Crypto coins don’t magically solve political problems: there has been a trend for countries facing political or economic difficulties to offer a solution in the form of a national crypto coin. Turkey and Iran are the latest countries to consider that option. And those are not grass-roots efforts, but a move intended by the governments. Yet the usage of a crypto coin can in no way guarantee the end of corruption, and solve other conflicts inside and outside the country.
Lots of Cheering Now, but Will Venezuela’s New Crypto Cause Lots of Crying Later?
The Petro may not even be backed by real oil, but by an estimate of the capacity of one oil field. And if the country’s economy in fact grinds to a halt due to logistical problems, the presence of a non-inflationary digital asset would be meaningless.
Yet for some, the launch of the Petro may be a valuable learning experience for the crypto space, one that may pave a path for governments to decide on crypto coins as legal tender – with results both positive and negative.
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