Venezuela’s Bizarre Campaign to Launch Its Own Cryptocurrency

Venezuela's President Nicolas Maduro during a press conference to launch to the market a new oil-backed cryptocurrency called "Petro."
Venezuela’s President Nicolas Maduro during a press conference to launch to the market a new oil-backed cryptocurrency called “Petro.”

In January, the Venezuelan government released a curious white paper detailing plans for the world’s first government-sponsored cryptocurrency called petro, which would be backed by the country’s oil reserves. Now the idea is coming to life—and it’s confusing.

After launching a presale for the tokens this past Tuesday, President Nicolás Maduro claimed that the government had raised $735 million in a single day. The astonishing sum would seem to advance Maduro’s goal of using the cryptocurrency to bail out the country’s flailing economy, which has been grappling with hyperinflation and U.S. sanctions. Yet no one has been able to independently verify his claim, and crypto experts have highlighted other details in the government’s sales pitch for petro that don’t quite add up.

As Timothy B. Lee lays out in an extensive explainer in Ars Technica, red flags abound in the white paper for petro, and the country’s sloppy execution of the initial sale doesn’t inspire much confidence, either. For one, Maduro is trying to legitimize the currency by implying that it’s backed by oil, which will supposedly make it more stable. But in actuality, the government has only pledged to allow people to pay taxes using petros at an exchange rate based on oil prices, which is a deceptive deal, given that the country has a history of manipulating these rates. Plus, Venezuela has been fumbling the basics of setting up the technology, neglecting the careful planning and testing required for such an endeavor. Hours before the presale, it appeared as if petro’s facilitators were still choosing the digital ledger that would host the cryptocurrency, a decision that should have been made weeks beforehand to allow for testing, writes Lee.

Venezuela’s political climate is also not conducive to creating a government-sponsored cryptocurrency. Maduro is riding roughshod over the country’s legislators, who say petro is essentially a high-tech workaround for issuing debt and thus needs their approval. The U.S.
Treasury has warned potential investors that trading petro could violate sanctions that bar them from buying newly issued debt from Venezuela. In fact, Maduro’s motivation in creating the cryptocurrency was partly to circumvent these sanctions.

Regardless of the numerous flaws and obstacles in petro’s way, there seems to be a concerted yet bizarre social media push to hype the cryptocurrency. Venezuela’s Superintendent of Crypto Assets has created Twitter and Instagram accounts with thousands of followers to spread good news about petro accompanied by flattering pictures of Maduro. Various other government officials and departments have also been publicizing the currency on Twitter.

Maduro himself has been a big part of this push, making a Facebook Live appearance to discuss the cryptocurrency and posting regularly about it on his various social media accounts. In one of his odder posts, he announced on Twitter that the government had partnered with a company called Aerotrading, which he wrote was “una de las más grandes empresas de Blockchain” (roughly: one of the biggest Blockchain companies). Apparently, though, few people have heard of Aerotrading. Its website is a single page that has nothing but links to its Twitter account and email, and a logo that reads “The Biggest Blockchain Consultancy Company.” There is no information regarding what its services are or who runs it. Its Twitter account started posting only a day after Maduro made the announcement and has only three suspiciously generic tweets on its timeline:

Meanwhile, users on Telegram, a messaging app popular among cryptocurrency traders, have been enthusiastically discussing petro over the past month. A group devoted to the cryptocurrency called “El Petro” currently has close to 1,300 members who communicate almost entirely in Spanish. The message board is filled with users quoting complimentary coverage of petro, much of which comes from RT’s Spanish-language branch; one article shared from the Kremlin-linked outlet is titled “The two reasons why Caracas calls Petro ‘one of the most secure cryptocurrencies in the world.’” (Maduro has also been sharing petro coverage from RT.) Administrators for associated groups have been directing people to the site where they can register to buy petro and have been removing users who criticize the currency.

We can expect the same kind of frenzy next week, when Maduro says he is launching another cryptocurrency—one called Petro Gold.