(Bloomberg) -- Venezuela’s first cryptocurrency sales will be negotiated privately, which may let the government offer wider discounts as it uses the digital token to dodge a dollar shortage.
An initial round of sales for about 40 percent of the Petro tokens will begin next month for institutional investors, according to a white paper published Wednesday. While an earlier draft showed a transparent process with discounts as deep as 60 percent for early buyers, the final paper showed the transactions will be private.
The plan is to sell the remaining tokens to the public at decreasing discounts to encourage their use in everyday shopping and bigger transactions, such as paying taxes. The sales represent a major initiative by President Nicolas Maduro to reorder Venezuela’s economy after its bolivar currency became virtually worthless amid quadruple-digit inflation and one of the world’s deepest recessions. They might also help the country skirt sanctions that discourage transactions in dollars.
“This is the moment to accelerate the entry of the Petro, to have faith in what we’ve created, and in the technological and intellectual capacity of our country," Maduro said on state television Tuesday. "The Petro will have a great impact in how we access foreign currencies for the country and in how we obtain goods and services that we need from around the world.”
Barrel-Backed
The reference price for the Petro will be tied to the cost of a barrel of Venezuelan oil, or about $60 in the second week of January. While Maduro has said the token will be backed by the country’s oil reserves, the world’s largest, there is no mechanism to exchange the cryptocurrency for crude or other hard assets.
About 38.4 million Petros, out of a total 100 million, will be available to institutional buyers starting Feb. 20, with a series of increasingly smaller discounts applied to stimulate early demand, the white paper says. A sale of about 44 million Petros will begin a month later, featuring four levels of smaller discounts for every 5 million Petros until a final fifth block of 24 million is sold with no discount.
The rest of the tokens will be held by by the Venezuelan Superintendency of Currency.
Unlike the world’s most popular cryptocurrency, Bitcoin, which can be virtually mined using computers, there will be a set number of Petros, according to the white paper. Venezuela guarantees it will accept Petros as payment for taxes and fees.
The government will also promote the Petro abroad, with emphasis on developing countries and allied nations, and via the state-owned oil producer Petroleos de Venezuela.
Venezuela also may incorporate the Petro into the “card of the fatherland,” a state identification used to claim government subsidies and regulated foods, Maduro said Tuesday.
The country is suffering a dire shortage of bank notes after the central bank failed to issue enough cash to keep pace with surging inflation. ATMs are empty across the capital, Caracas, and banks limit customers to withdrawing the equivalent of just a few cents a day. The International Monetary Fund predicts inflation will spiral to 13,000 percent by the end of this year, while the economy is set to contract 15 percent.
