With the South American nation's own currency weaker than ever, Venezuelan President Nicolas Maduro on Friday ordered the issuance of a new cryptocurrency that he says is the world's first to be backed by a country's physical assets.
Some 100 million of the currency, known as the petro, are to be circulated — supported by the country's oil reserves, Maduro said.
"I have ordered the release of 100 million petro with the legal sustenance of Venezuela's certified and legalized oil wealth," Maduro said in a state television address, a month after the digital currency was first mooted.
Aids government cash flow
He said the petro will help the oil-rich state beat the "tyranny of the dollar," in reference to the fact that most oil is priced and traded in the US currency.
The new petro would help the government bypass US-led financial sanctions that have been imposed on the oil-rich state, the Venezuelan leader added.
Maduro and several of his top-ranking officials have been blacklisted by Washington, and the country is banned from negotiating new state or oil-backed bonds.
The petro is expected to be formally launched on January 14 and available for sale a week later, he said.
Maduro promised that each unit of the currency would be pegged to Venezuela's oil basket, which this week averaged $59.07 (€49.10) per barrel, according to the oil ministry. That suggests the total cryptocurrency issued would be worth just over $5.9 billion (€4.9 billion).
The Venezuelan president said the petro would be supported by one of several fields of the so-called Orinoco oil belt, a vast reservoir of heavy crude in the east of the country.
The field that will be offered as backup has a proven reserve of 5 billion barrels of crude oil.
Investors not convinced
Despite his optimism, the virtual currency's release has been met with ridicule by Maduro's opponents and investors alike.
Opposition politicians say the plan is doomed to fail and won't help ordinary Venezuelans who are suffering from high inflation and food shortages caused by the government's mismanagement of the economy.
Some financial analysts said investors would likely remain on the sidelines, citing a lack of confidence in Maduro's socialist government, which last month was forced to restructure or refinance its foreign debt.
Inflation eclipsing oil wealth
Venezuela has the world's largest oil reserves, according to OPEC, and makes some 95 percent of its export revenue from oil.
But despite a recent decade-long oil boom, the country remains in deep financial crisis. The government is accused of squandering the gains on overly generous social programs, and it remains indifferent to calls for painful reforms.
Venezuela's bolivar currency is officially traded at 10 to the dollar, but on the black market, a dollar currently buys 137,000 bolivars.
With a severely weakened currency, local economic consultancy Ecoanalitica said prices rose more than 80 percent in December alone. Money supply, according to the central bank, was up more than 1,000 percent last year.
Bitcoin and hundreds of other digital currencies have emerged over the past few years. But despite their incredible rise in value, several economics and policy experts have warned that they are, in effect, worthless as they are not backed by any central bank.
mm/rc (Reuters, dpa)