There had previously been no verifiable evidence that Venezuela’s Petro cryptocurrency existed, as discussed in a Crypto.IQ article from December. However, as of Jan. 28, there is solid evidence that the Petro exists thanks to an investigation by CCN.
The revelation that the Petro exists comes at the same time the United States has sanctioned Venezuela’s national oil company, Petroleos de Venezuela, S.A (PdVSA). These sanctions will test whether the Petro really is a sufficient means of circumventing United States sanctions, which was the original reason the Petro was created as explained in the white paper.
Verifiable Evidence That The Petro Exists
Twitter user @jaldps posted that he had received a small transfer of Petro as a test, and everything had worked perfectly. CCN then received some Petro from @jaldps, and the transaction indeed showed up and the ID is searchable on the Petro block explorer. From that transaction link, it is possible to navigate to other Petro addresses and blocks, proving that the Petro is a real cryptocurrency.
Petro addresses contain 34 characters like Dash (DASH) addresses. The white paper says the Petro uses the X11 algorithm, like Dash (DASH), and 5,000 Petro is required to launch a masternode. Petro masternodes receive 0.01 percent rewards, and Petro is supposedly a hybrid of proof of work (PoW) and proof of stake (PoS), although no Petro PoW mining has been documented to date. The block time is stated to be 60 seconds. One hundred million Petro were pre-mined in the genesis block, which has been used for the Petro ICO.
The strength of using a masternode protocol like Dash (DASH) is that the Petro is mixed through masternodes during each transaction, effectively laundering the Petro and increasing anonymity.
United States Sanctions Against Petroleos de Venezuela, S.A (PdVSA)
On the same day that this verifiable evidence that the Petro exists was published, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Petroleos de Venezuela, S.A (PdVSA).
“Today’s designation of PdVSA will help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela,” Secretary of the Treasury Steven T. Mnuchin said. “The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government.”
Essentially, the United States is demanding that Maduro hand over control of Venezuela to the opposition, or PdVSA will be sanctioned long term. The announcement by OFAC states that the PdVSA has been involved in over $1.2 billion worth of corruption, bribes, and money laundering which has been detrimental to the Venezuelan people.
United States citizens are prohibited from doing business with PdVSA. All assets of PdVSA under United States jurisdiction have been frozen.
Officials from the Trump administration estimate that $7 billion of PdVSA assets will be seized and $11 billion of oil exports will be stifled over the next year. Beyond the severe PdVSA sanctions, the Bank of England blocked a $1.2 billion gold withdrawal that was requested by Venezuela’s government. President Maduro of Venezuela responded to the PdVSA sanctions by saying “You will have blood on your hands, President Trump.”
Is The Petro A Viable Mechanism For Sustaining Venezuela’s Oil Trade?
Before the PdVSA sanctions, the Petro itself had been sanctioned by President Trump.
The Petro cryptocurrency will now be put to its ultimate test. The Petro is needed by PdVSA in order to sustain Venezuela’s international oil trade. But questions arise about whether the Petro is secure and if it can be rendered useless by centralized points of failure in the Venezuelan government. And the ultimate question remains: Are there enough oil buyers in the world willing to defy United States sanctions and do business with PdVSA while using Petro as payment?
Perhaps most importantly, what is the Petro actually worth? According to the white paper, the Petro is backed by oil, gold, iron, and diamonds, but this has not been verified.
Regardless of whether the Petro is backed by natural resources, it is clear the Petro’s value depends on it being redeemable via Venezuela’s government. This is a critical central point of failure. If Venezuela’s government cannot pay out Petro redemptions, the Petro becomes worthless. Heavy losses from the sanctions could possibly be enough to make Venezuela default on Petro redemptions.
Further, the Venezuelan government regularly updates the price of the Petro in terms of Sovereign Bolivars, but the Sovereign Bolivar is nearing one million percent inflation per year, according to the Cafe Con Leche Index, and the exchange rate updates for the Petro can’t keep up. Originally, the Petro was pegged at $60, but now it is only worth 36,000 Sovereign Bolivars which is roughly $13, according to the Cafe Con Leche Index.
The sanctioning of the Petro by the United States, which makes the Petro illegal to use in most of the world, combined with a constantly declining value likely makes the Petro an impracticable mechanism to sustain Venezuela’s global oil trade.