Petro gold
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Petro Gold is a cryptocurrency. It was created in 2018 by Venezuelian government. As declared, petro gold is pegged to gold, but it isn't clear is it pegged to country's reserve or gold produced in the country. It is a second cryptocurrency announced by Venezuela. The first was petro which was alleged to be pegged to Venezuelian crude-oil.
Petro gold on crude-oil market
Petro gold is also an idea alternative to petro dollar. Most of the crude-oil trade on the world is made in U.S. dollars. Among others due to this fact dollar is today the backup currency. However some countries declared to trade crude-oil using gold. In the past it were Iraq, Libia and Iran. Also China attempts to trade crude-oil with Russia without using U.S. dollar. That can lower demand on U.S. dollar and lead to emerging a new backup currency.
Genesis of the introduction of cryptocurrencies
Venezuela is the first and currently the only state that has introduced its own cryptocurrency. This is an unusual and courageous venture because digital money has so far remained outside the public sphere and it has not happened that the state authorities officially supported the functioning of cryptocurrency markets. Despite the largest crude oil reserves in the world, Venezuela is affected by a serious economic crisis. The country is struggling with hyperinflation and the community lives in extreme poverty. The irresponsibility of President Nicolas Maduro's socialist government has contributed to the dramatic situation in the country. The United States, in response to the lack of respect for democratic principles by the Venezuelan authorities, imposed sanctions on the country that led to its financial blockade. Therefore, the launch of Venezuelan digital money is to be a salvation for the country's dramatic economic situation.
Initial reluctance to cryptocurrency
The decision to introduce crypto currency in Venezuela was surprising, because the country initially fought with them. The drastic decline in Venezuelan bolivar caused the local community to become interested in the digital money of Bitcoin (C. Wulf 2018, s. 28). Bitcoin even more strongly hit the low value of local money, so the criticism of crypto-currency was common.
Expectations for the introduction of cryptocurrencies
Both "petro" and "petro gold" cryptocurrencies are supposed to be a source of money for the state budget. Cryptocurrencies are considered to be one of the most powerful innovations in the world of finance in the last centuries. They are said to be a way of exchanging wealth in society. The introduction of digital currencies by the Venezuelan authorities is aimed at attracting foreign investors, thanks to which it will be possible to finance the economy, independence from the dollar and US policy, social development of the country (G. Maihold 2018, s. 5). The specificity of the cryptocurrency market and the boom that accompanies them favors easier access to investors. The Venezuelan government wants to encourage people to use cryptocurrency to become so common that it can be paid throughout the country. It is also expected that in the course of time cryptocurrencies will replace the current local currency.
References
- Zhang, Y. J., & Wei, Y. M. (2010). The crude oil market and the gold market: Evidence for cointegration, causality and price discovery. Resources Policy, 35(3), 168-177.
- Wulf, C., (2018).Bitcoins in Venezuela: Egzamining the Origins, Nature, and Viability of Cryptocurriencies in the Hyperinflated Country of Venezuela. University Honors Theses, Paper 518.
- Maihold, G., (2018). Colombia's peace and Venezuela's turmoil: an emerging regional crisis landscape in South America.
Author: Anna Gołdyn
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