Exit scam? Venezuela’s Petro remains a mirage

Posted: 3 September 2018 5:39 pm
Venezuela prepares to issue Petro CF
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The Petro has yet to make any real appearance, even as Venezuela's crypto agency starts disappearing.

There's no sign of the Venezuelan Petro nor the oil that's meant to be backing it, Reuters says, leaving many to wonder whether the world's first national cryptocurrency and first national ICO was also the world's first national cryptocurrency exit scam.

The Petro was meant to go live in the week of 20 August, but has so far done nothing. Meanwhile, the oil reserves which Venezuela's President Maduro has said will back the coin are similarly hard to find, with officials only pointing at Venezuela's Atapirire region, where experts say there's no good chance of extracting enough oil in the near future.

Under construction

The Petro was issued as a NEM token, but the blockchain shows only a handful of transactions out of the official wallet. Hugbel Roa, a cabinet minister involved in the creation of the Petro, described these transactions as test runs and the NEM-based Petro itself as an early model to be superseded as Venezuela comes out with its own blockchain.

So far "nobody has been able to make use of the Petro ... nor have any resources been received," he said to Reuters. But those who purchased the Petro might not be entirely out of luck yet. Buyers have made "reservations," Roa said, and might receive their coins after release.

Maduro claims the sale raised $5 billion, but so far no big buyers have come out as holders. This might not be much of a surprise though, with the Petro being banned in the USA.

It wouldn't be the first time a crypto project has been delayed, but the Venezuelan government's insistence that it's a functional coin and that the Petro is now being used as a viable accounting unit is quite at odds with reality, and with a coin that can't be bought, sold or traded.

"There is no way to link prices or exchange rates to a token that doesn’t trade, precisely because there is no way to know what it actually sells for," said Alejandro Machado, a Venezuelan computer scientist and cryptocurrency consultant.

It's not listed on any exchanges, and so doesn't yet have any open market value and can't yet be used as an accounting unit. Even when it was on sale, the Petro ICO's dictatorial purchase agreements made it clear that Venezuela's Superintendence of Cryptoassets, the agency overseeing the Petro, essentially has full discretion to declare the price to be whatever it wants it to be with or without any actual oil backing.

The official currency of the state of confusion

The general picture painted by Reuters is a scattered and disorganised project. President Maduro says it's live and operational, his political opponents say it's a scam, Roa says it's still under construction and the Superintendence of Cryptoassets, the government agency which supposedly oversees the Petro and dictates its price, doesn't really seem to exist.

When Reuters journalists visited Venezuela's Finance Ministry, where the Superintendence is meant to be housed, they were informed that the department "does not yet have a physical presence here."

It doesn't seem to have a digital presence either. The department's website isn't functional and the department's official Twitter account abruptly went dead on 20 June after tweeting dozens of times per day in the preceding months. It also looks much more like a fan club than a government department and said almost nothing about the Petro in its short life.

juicy crypto words

All of Reuters' efforts to contact the Superintendence in different ways led nowhere.

It may not help that the Petro was initially dreamed up by Russian officials, and it's possible that the project was scuppered with the withdrawal of support from overseas. The new slimmed-down bolivar, which cut five zeros off the old one and which was meant to be tied to the Petro, was similarly released in an air of confusion and paralysed the country as people try to work out whether it has legs.

The Petro might be an exit scam that's since run its course.

Step one is to build hype. Step two is to raise as much money as possible. Step three is to disconnect and become unreachable while buyers gradually progress through the stages of grief, from denial to acceptance.

If the Petro thread on BitcoinTalk is any indication, most are in the anger phase.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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