Petro: Can Venezuela’s oil-backed cryptocurrency save its economy?

Venezuela will today begin selling its own oil-backed cryptocurrency, which the government hopes will raise more than $1bn and save the country’s crumbling economy.

Venezuela’s President Nicolas Maduro has claimed each ‘petro’ token will be backed up by one barrel of state-owned oil and plans to issue some 100 million, worth a total of $6bn.

The plan has divided opinion, with The Guardian questioning whether the new cryptocurrency could turn out to be “an ingenious plan to evade US sanctions... or a South American s***coin” – adopting the slang term for digital currencies that become worthless over time.

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Venezuela’s traditional currency, the bolivar, has collapsed as is suffers widespread food shortages, hyper-inflation of 13,000% and political repression.

Its dire economic situation has not been helped by financial sanctions imposed by Washington last year, leading to a dash for cash that critics say is the real driving force behind the launch of the petro.

Venezuelan journalist Francisco Toro told CNBC that Venezuela was turning to cryptocurrency out of “desperation” because of its economic isolation from the US.

“This idea that sanctions are hemming demand, that they need to need to get around sanctions, this is [followers of Hugo Chavez] drinking their own Kool Aid and believing their own propaganda,” he said.

Others are more optimistic, with some currency experts suggesting the launch could serve as a precursor to similar projects from other world leaders.

In a recent speech promoting the digital currency, Maduro insisted the petro would help turn Venezuela into “an economic powerhouse”.

It may seem fanciful, but the beleaguered socialist leader “has often proven his doubters wrong”, says The Guardian.