Venezuela tries a cryptocurrency to solve its economic crisis

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Venezuela has launched the world's first sovereign cryptocurrency, El Petro, in an attempt to bypass tough economic sanctions imposed by the USA government.

Venezuela's economic crisis has largely been triggered by a slide in oil prices and production, which accounts for 96% of the country's exports.

Venezuela has allocated five billion barrels of oil to back its new digital currency, which will be tied to the cost of a barrel of Venezuelan oil.

A total of 100-million petros will go on sale, with an initial value set at $60, based on the price of a barrel of Venezuelan crude in mid-January.

"Together it is possible to build history, we are at the technological forefront of the world", the president said after ordering the certification of more than five thousand miners who will exploit the cryptocurrency in the country. On the other hand, the opposition leaders of Venezuela have also snubbed this move by saying "the sale constitutes an illegal debt issuance that circumvents Venezuela's majority-opposition legislature, and the U.S. Treasury Department has warned it may violate sanctions levied previous year", reports Reuters.

In a further potential blow to the opposition, a senior official in the ruling socialist party proposed early elections for Venezuela's opposition-controlled congress as well, cutting its term short by more than a year.

Bitcoin and other digital tokens are already widely used in Venezuela as a hedge against hyperinflation and an easy-to-use mechanism for paying for everything from doctors*visits to honeymoons in a country where obtaining hard currency requires transactions in the illegal black market.

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"They have been trying to figure out ways to get around anti-money laundering sanctions provisions, and crypto is maybe one way they can do that", Venezuelan journalist Francisco Toro told CNBC.

And Venezuela's inflation rises faster in a day than it does in stable countries in a year, he said, adding that dreaming up a new currency alone isn't the answer.

Here is what we know about the new currency.

Venezuelan Cryptocurrency Superintendent Carlos Vargas last week said the government was expecting to draw investment from investors in Turkey, Qatar, the United States and Europe.

Venezuelan President, Nicolas Maduro has invited U.S. President Donald Trump to launch dialogue between Caracas and Washington, setting the date and time for a meeting.

Announced in December 2017, the petro is meant to supplement Venezuela's bolivar fuerte (VEF) currency and help overcome U.S. sanctions.

Yet questions remain about which network the token will operate within, given that one document released today highlights the ethereum network, while another, constituting a buyer's guide, cites an alternative blockchain system called NEM.

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