It seems like cryptocurrencies are finally realizing its original goal: to be the ultimate alternative to government-controlled currencies. A step by Venezuelan government points to this direction.
Venezuela launched their own cryptocurrency on Tuesday, called the Petro. The token will be based on Ethereum and is similar to many other ERC20 tokens in the market right now. Petro is fully backed by the Venezuelan government and will be the national cryptocurrency of the nation.
But the biggest feature was the ICOs that would occur right before the coin is up-and-running. According to estimates, Petro is looking to raise up to $5 billion from the ICOs, amounting to about 5% of the total market cap of Ethereum. It will easily be the biggest ICOs in the history of cryptocurrency.
However, things are not as rosy as they seem to be. The center of criticism was the fact that Petro is backed by the petroleum reserves of the country. Cryptocurrencies, like fiat currencies, do not need to be backed by any physical asset. Critics have argued that it is a poor attempt to escape the national debt by shifting towards cryptocurrency and taking petroleum reserves into the fold. In fact, the Venezuelan Congress has outright rejected the proposal of a national cryptocurrency.
The Venezuelan government has been battling charges of blatant corruption, along with defaulting on debts from various countries. In fact, the USA and European nations were planning to take actions against the country for defaulting on loans. Introducing Petro seems like a move to escape those sanctions.
Of course, this puts a direct question on the motivation behind the ICOs. While most cryptocurrencies use ICOs as a way to raise initial capital that could be used for development of the technology, it seems that Venezuela is using the ICOs of Petro to raise money and clear their debts. If true, it would nothing less than a scam, albeit one sponsored by the government itself.
Whether Venezuelan is trying to collect money for repaying its debts or is genuinely interested in the technology is yet to be determined. One can only hope that it is the latter.
To everyone looking at the #Petro and shaking their head... Give it time! We don't have enough information to learn the lessons they're going to teach us, and they will be VERY valuable lessons!— Adam B. Levine (@GamerAndy) February 21, 2018
Win or lose (most likely), this is our first government issued legal tender!