Venezuela’s President Nicolas Maduro has proposed within the OPEC nations that oil should be backed by “joint cryptocurrency mechanism” in supporting petro, which is new and state backed virtual currency of the country.
According to Venezuelan state radio, Maduro is expected to encourage the OPEC members backing cryptocurrency. Maduro said:
“I am going to officially propose to all OPEC and non-OPEC producing countries that we adopt a joint cryptocurrency mechanism backed by oil.”
Petro was launched by Maduro in December that is backed by Venezuela’s oil, gas, and gold and diamond reserves.
The new currency is a ploy of alleviating food shortages and economic crisis as well as circumventing sanctions imposed by United States.
Venezuela has allocated five billion barrels of oil to back its new digital currency, which will be tied to the cost of a barrel of Venezuelan oil.
The international cash market outside of the normal financial systems is expected to be accessed with the help of petro, which currently embargoed by the US sanctions.
The US Treasury has responded to the circumvention:
“The petro digital currency would appear to be an extension of credit to the Venezuelan government … [and] could, therefore, expose US persons to legal risk.”
It is not yet known whether OPEC would support the scheme. With regards to cyptocurrency policymaking the OPEC nations are not entirely united.
Nigeria is not too keen about cryptocurrencies linked to proceeds coming from oil cartels. They have stated that Bitcoin was a “gamble”. On the other hand, Iraq found Bitcoin interesting to deal with rampant inflationary pressure on their domestic currency. There isn’t unanimity in regard to cryptocurrency usage within OPEC member states.
On the other hand, United States has warned that using petro in oil dealings can be violations of sanctions by Venezuela, which prohibit the purchase of newly issued Venezuelan debt.