Maduro to create cryptocurrency backed in oil and diamond reserves

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President Nicolas Maduro

As Venezuela’s financial crisis deepens, President Nicolas Maduro announced on Sunday the creation of a digital cryptocurrency to fight a financial blockade fueled by US sanctions on the Latin American country.

The digital cryptocurrency will be called the Petro and it will be backed up with oil and gas as well as diamond reserves.

“This is going to allow us to move toward new forms of international financing for the country’s economic and social development,” Mr. Maduro said on his weekly televised programme; Los Domingos con Maduro – Sunday’s with Maduro.

In August U.S. President Donald Trump signed an executive order that prohibits dealings in new debt from the Venezuelan government or its state oil company PDVSA in an effort to halt financing that the White House said fuels President Maduro’s “dictatorship.”

The Venezuelan Bolivar has plunged by 95.5 per cent against the US Dollar on the black market and it is expected to close the year with a hyperinflation of approximately 2,000%.

Henkel García, Director of Econométrica, expressed insecurities towards the functionality of the cryptocurrency ‘Petro’. Garcia explains that currencies fall into its functions as quick as people trust in them. Trusts in currencies have to pass through governments and its economic systems. Venezuela lacks both of them and cryptocurrencies do not escape from that dynamic.

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.