El Petro, the oil-backed cryptocurrency launched by the Venezuelan government has gotten a nod from its national assembly.
This clears a major hurdle for the controversial cryptocurrency that had been earlier termed unconstitutional by the same house.
The decree passed by the lower house will now “establish the basis for the management of these alternative mechanisms in financial and commercial activities,” a statement from the Vice President Tereck El Assaimi said.
Details about the digital currency are scantly but the country’s president Nicholas Maduro said the Petro had raised $735 million shortly after it was launched in February – technically known as the presale in ICO parlance.
Later, Maduro claimed El Petro had gathered $5 billion. Each unit is equal to a barrel of oil and theoretically, the amount is backed by 5 billion barrels of oil.
Clever Way to Circumvent Sanctions
El Petro was largely seen as a clever way to circumvent crippling US sanctions on the country – the President did not hide this fact. In the government’s view, it is just trying to boost its “monetary sovereignty.
However, on the day it was supposed to go on sale, President Donald Trump issued an executive order banning it in the US and barring US citizens from participating cutting off a large pool of potential cryptocurrency investors in one stroke.
El Petro is backed by the country’s large oil reserves which have not proven helpful in solving the country’s economic woes.
Help from Russia
The government is rumoured to have gotten some help from Russia in developing the cryptocurrency – itself facing sanctions from the EU and US. Russia has also hinted at launching its own cryptocurrency.
Venezuela’s economy is in dire straits with inflation for this year projected at 13,000% according to the IMF. Under the circumstances, a cryptocurrency, with its anti-inflationary properties would be a natural pick of an experiment.
If it succeeds, it could be a turning point for other cities and countries mulling with the option.
Cities Launching Cryptocurrencies
Dubai and Seoul are some of the cities that have recently floated the idea of using digital assets. Seoul, for example, wants to support its welfare programs and pay contractors using digital assets. Dubai has a wider plan to integrate cryptocurrencies into the running of the city.
Other countries like Malta and recently France are looking at attracting capital from the current cryptocurrency craze for its start ups.
If Venezuela’s claims are true, the plan is already working. 30 ambulances have already been delivered bought using El Petro, according to local media reports.
Russia is even said to be considering the option of using El Petro to settle transactions between the two countries.
The move has not however gone without criticism. Opposition lawmakers have previously slammed the moves as illegal and amounting to the issuing of debt. Officials from the US Treasury had been wary about the intention of launching El Petro and had been issuing warnings before Trump’s executive order.
Second Cryptocurrency Backed by Gold
Immediately after the launch in February, the president hinted at another cryptocurrency backed by Gold. This second cryptocurrency he said would even be more powerful than El Petro.