Venezuela begins trading of Petro cryptocurrency ahead of PDVSA bond repayments

Venezuela begins trading of Petro cryptocurrency ahead of PDVSA bond repayments

Today, Venezuela officially launches electronic trading of its Petro cryptocurrency. The currency is said to be backed by physical supplies

Venezuela’s President Nicolas Maduro reads a document during the event launching the new Venezuelan cryptocurrency “Petro” in Caracas

Photo: Reuters/Marco Bello

Today, Venezuela officially launches electronic trading of its Petro cryptocurrency. The currency is said to be backed by physical supplies of Venezuelan crude and is designed to circumvent US economic sanctions.

The total amount of money raised from Petro sales totals roughly $5 billion, which the $45 billion debt owed by state-owned oil firm PDVSA far outweighs. The debt issue for PDVSA also has greater domestic ramifications, as Venezuela’s oil output continues to drop from a significant decline in investment caused by rising inflation. Some of PDVSA’s debt is secured by its majority holding of US-based refiner Citgo, which PDVSA uses to supply Venezuela with much needed refined petroleum product.

Citgo is also the last major source of hard currency for the Maduro government, and the Petro has become a crucial element in ensuring that PDVSA can continue to make dollar repayments to prevent the seizure of its majority-stake in Citgo. The currency has been widely criticised for failing to disclose whether it would be secure against central interference by the government, which makes it unlikely that it will be widely adopted or be a long-term solution to protecting the Citgo stake. Absent major economic reform or a rise in the oil supplies that back the Petro, it is not expected to have any impact on the country’s economic crisis or hyper-inflation.

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