A Cryptocurrency Backed by Oil? Venezuela’s Petro May Strike Gold

With bitcoin currently on a rocket sled to the moon price-wise, and a horde of cryptocurrencies frantically billing themselves as “the next bitcoin”, it’s easy to think that cryptocurrency is rapidly becoming a mainstream product. Sufficiently so, in fact that the beleaguered and rapidly disintegrating nation of Venezuela is looking to put its bet-the-country hopes on cryptocurrency. To that end, it’s released its own version called the petro, so named because it’s backed by the country’s own oil reserves.

Launched by Venezuelan president Nicolas Maduro, the petro was designed to work around the financial sanctions put in place primarily by the United States. Maduro offered little in the way of specifics, particularly in terms of how it would be launched, where it would be made available, or why anyone would care. It would be backed not only by oil reserves, but also by other tangibles like diamonds.

He further declared that the 21st century had indeed arrived in Venezuela—if a bit late—in the midst of a broadcast of Christmas songs and accompanying dancing.

Following the announcement, large portions of Venezuela’s government immediately cried foul, saying that such a move needed congressional approval and, since such had not been given, was totally not a thing. One lawmaker, economist Angel Alvarado, told Reuters that the move was “Maduro being a clown,” and that the move had “…no credibility.”

Leave aside for a moment the obvious problem here of a government squabbling so hard that it’s unsure whether or not it’s actually issued an entire new currency, the concept itself has some very big potential ramifications. On the one hand, a cryptocurrency could be a major investment vehicle. Certainly, there would be some interest in a cryptocurrency backed by something tangible, especially in a country where toilet paper is selling for premium prices.

On the other hand, the chances of the world allowing its citizenry to trade in a currency that could effectively ruin the entire concept of economic sanctions is almost too ludicrous to consider. In some cases, buying petro or its equivalent might be giving “aid and comfort” to an enemy nation. The idea that you could actually collect on the backing items is likewise preposterous. I have a strong feeling this will never get off the ground.