Is the Petro a Threat to Our Democracy?

It is now official: the first truly regulated and sovereign cryptocurrency has been launched with an Initial Coin Offering (ICO) that has raised close to $800M in the first pre-sale and expects to raise a total of $5B. Not bad for a single ICO, given that last year the total amount raised through ICOs was $4B.

The Petro (PTR) is an official cryptocurrency issued by the Venezuelan government and backed by the full faith of their gigantic 300 billion barrel oil reserves. In full compliance with ICO practices, a white paper was published for investors to review. This should be great news for the blockchain economy.

However, Venezuela’s government and institutions are under severe sanctions imposed by the United States Government. Yes, a US person or entity cannot legally purchase a Petro coin, and the consequences for doing this are no fun. Consequences can go up to $1M per violation and imprisonment up to 20 years for any US person who violates these sanctions.

Maduro tweeted he raised $735M and named it a “big solution.”

According to the Petro white paper, its goal is to create a better and fair financial system, which could benefit the countries that are still in development. The paper claims the US dollar is a detriment to world stability because it is not backed by gold. For context, the dollar was at one point backed by gold, but that practice was ended in 1933 in order to help the US get out of the Great Depression. The dollar is now a floating currency backed by the full faith of the U.S. Government.

Since its ICO, the Petro has confused many as to which blockchain it is using. The white paper claims it is on the New Economy Movement (NEM) blockchain, but many crypto websites have listed it being an ERC-20 Ethereum smart contract. This confusion has generated opportunities to defraud investors. To top this lack of clarity, the white paper states the initial token may be exchanged later for another one.

The real issue is this: will the Petro cryptocurrency help the Venezuelan government escape the sanctions imposed on them by the US government? Is cryptocurrency technology now in the service of political warfare? Senator Rubio has asked the US Treasury to monitor the Petro and take action to prevent them from evading the sanctions. What is most interesting is how will the US Treasury, headed by Steve Mnuchin, be able to thwart the success of the Petro cryptocurrency?

After all, blockchain technology is decentralized and in practice cannot be controlled by any government or entity. Tens of thousands of servers are verifying and duplicating the Petro transactions and rewarding the miners for this service. How is any government supposed to stop that? Of course, the blockchain can be monitored because it is a public ledger, but identifying who owns each Petro would be extremely difficult.

The Petro was created to perform exactly like Bitcoin. It is a new currency that is limited in supply and techncially not controlled by any entity, even the Venezuelan Government. Its purpose is to build absolute trust because of its decentralization, immutability, transparency and security. Since 2009, Bitcoin has proven its reliability, and it is trusted by millions of investors. Will the Petro find the same success?

Did the people behind the creation of Bitcoin ever imagine the technology could be used by governments to finance their economy? The blockchain is now officially a weapon to be used by any rogue government to finance its activities, whether it pleases the U.S. Government or not. Stay tuned, there are many more Government-issued cryptocurrencies to come.