The invention of Bitcoin as the first digital currency had come to break the traditional way fiat currency was used in the world. The acceptance of the cryptocurrency remained very slow until the year 2017 when the prices of Bitcoin skyrocketed and gave other currencies a chance to emerge in the financial market too.
Fuad Ahmed analyzes the situation and says that its the price hike of Bitcoin, that opened for other currencies the doors they spent ages waiting for. This was the time when many cryptocurrencies realizing the scope for their sustenance in the financial market, surfaced. The same phenomenon led to the price hike of digital currencies and companies accepting them as a medium of payment in exchange for their products.
Amidst the revolution caused by the growing demand for digital currency created by Bitcoin and Blockchain, there recently came out a currency called Petro. This newest currency in the market was launched last week around February 20th. The official website of the currency claims that right after the 1st issue of its opening, there were released 100 million tokens for the purpose of trading. The company also informed that each token was sold at the price of $60, costing nearly the same as the price of a barrel of oil.
The currency is an invention of the Venezuelan President Nicolas Maduro, which is presumably like the petrocurrency commonly used in the past ages before gold was set as the standard to back the dollar. Just like Russia and Norway, through the coining of a new cryptocurrency, Venezuela is also aiming to enter the market with a currency backed by petrol.
Fuad Ahmed, studies the prospects for the future of petro by quoting the statement of Maduro in which he claimed to have generated the amount of $735 billion on the day of the launch of petro.
He further went on to claim that the exchange received 171,000 certified purchase orders on the currency’s opening day, where 40.8% of the orders were in US dollars. the other orders varied in different currencies like Euro and some cryptocurrencies. 6.5 % of the petro orders were received in Euro, 33.8 % were in Bitcoin, while 18.4% were bought with Ethereum. This according to Fuad Ahmed, is the first step towards the acceptance of the new currency where the world is beginning to invest in a newly emerged currency, without waiting for it to reach a peak. He also opined that as a petroleum backed cryptocurrency, this is going to be one of its kind and has more reasons to remain more stable than any other cryptocurrency. The change in the prices of petro, according to Fuad Ahmed, is going to be very organic and not abrupt like other digital currencies. This is assumed to be the reason for many to be joining the league of petro holders.
This currency will be sold as tokens on the New Economy Movement, a blockchain based platform which supports cryptocurrencies. The Venezuelan government has selected the platform to launch petro and the currency had no political connotation. The petro although is launched by the government of Venezuela, it is not regulated by the central bank like the local currency Bolivar. However, also unlike the regular cryptocurrencies such as bitcoin and ether, this cryptocurrency just like Ripple, which is regularized by a company, is controlled by the government. Adding further to the details, the Venezuelan government admitted that although it’s controlled by the government, the currency has no particular political affiliation and no specific group running the government is responsible for the issuance of this currency. But, this is also considered that the operations related to the currency might fall under the jurisdiction of the President himself. Fuad Ahmed is furthering looking into reasons of why Venezuela came with the idea of launching a petroleum backed currency.
Venezuela, a rich country
The country by the Caribbean coast is believed to be a rich country because of its major oil reserves. It’s among the largest producers of crude oil, estimated at around 300 billion barrels of crude oil. The country had decided to not call themselves oil-rich rather be called just rich. As the wave of socialism had hit the world, the Venezuelan government too had sided with the doctrine and philosophy. The country in the wake of the same events had decided to find means of presenting themselves as the rich country. They built a state-owned oil company, extracted and exported oil, and distributed the revenue to the people and kept the rest. But, in the latest turn of events and followed by Maduro’s mismanagement of national oil company when the oil prices had escalated and it led the country in a massive crisis.
Rich but not too rich
The country, which was supposedly among the top tier of oil producers and exporters is facing a crunch right now. The country is under serious debt and is also facing a refugee crisis. They are supposed to pay about $60 billion to the foreign creditors as a debt while they carry just $10 billion in their reserves. However, recently, the president made surprise payments to the astonishment of analysts and rid the country from a huge chunk of debt that they were lying under. Now after a huge payment has been made, there is still an amount of $753 million that is to be paid by the month of August by the government. Being a socialist republic for a very long time, the country did not make arrangements for private business to flourish as a result of which the citizens of the country ended up with nothing in their hands. A majority of Venezuelan population today lives in a poor state where they cannot afford a proper meal for the day. The country is not equipped to provide for the people of the state the necessary health care and medicinal facilities they need for the survival. The plight of the people in Venezuela is perpetually deteriorating resulting in population moving out and protesting against the government.
Can petro be a new bitcoin
Fuad Ahmed, like all other analysts, analyzes Venezuela’s release of petro currency and says that although the currency is not going to be a new bitcoin, it’s going to be a new way of making money from oil. Since this is the first currency that is being backed by a country, it’s similar to be given the status of an official currency. Until now there hasn’t come a currency that is backed by state and controlled by the central bank. Although the concept contradicts the basic idea of a cryptocurrency, it’s also going to provide people the stability and security they seek when it comes to the purchase of a currency.
The oil production in Venezuela has taken a downslide in the past few years under the administration of Maduro. The oil production went down to as low as 2 million barrel per day, which is not going to come back in place anytime soon. In the past, all the government’s initiatives to sell assets to Russia and generate a profit have remained futile. While the plans with conciliation with Russia didn’t work out, the relations with the US were already under hot waters because of Maduro being an autocratic ruler and the US the flag bearer of democracy. This seems to be the reason for the immediate release of the cryptocurrency by a state, which undoubtedly is an unprecedented move by a state, but the motive behind it is trivial and desperate in nature. The Venezuelan government seems to be in hurry to make money to pay the debts with no plan of comparison with other cryptocurrencies in the market.
Although the move of launching a digital currency by Venezuela may have its own personal reasons, the new cryptocurrency is definitely going to impact the current financial markets in the world. the possible results of the currency’s launch can be gauged by the response the world gave on the 1st day of the currency’s launch. The centrally regulated currency may be contrary to the basic notion of digital currency, there is a particular kind of security that buyers and investors are going to get out of a regulated crypto business. This very step is triggering a lot of upheaval in the financial markets, where now Iran is also moving towards launching a cryptocurrency of its own.