Venezuela To Eventually Sell Oil Only In Petro ERC20 Tokens, Starting March 2019

Colin Muller

Venezuelan president Nicolas Maduro has announced that all of its oil exports will eventually be sold only in Petros (PTR), the country’s state-backed Ethereum-powered cryptocurrency. The announcement was made on state television, after a meeting with Russian president Vladimir Putin last week.

It was subsequently reported by teleSUR (a media outlet backed by several Latin American countries’ governments, including Venezuela’s) that the sale of oil for PTR will begin in March of 2019.

Getting Around Sanctions

The full import of the move, and of the meeting with Putin, was to move away from US dollar-denominated exchange in the hydrocarbon market. “Russia is buying and selling oil and derivatives in [Chinese] yuan [...] We are progressively going to sell all our oil production in Petros,” teleSUR quoted Maduro as saying. Ethereum transactions, of course, cannot be blocked.

The decision to eventually sell only in Petros will be seen as somewhat provocative, because although the United States has applied many sanctions to the Venezuelan economy and key political figures in the past years, it has not done so for oil exports which are by far the most important for the Latin American country. The US has, however, banned US citizens from buying PTR tokens.

In any case, the rhetoric against Venezuela has gone full tilt as of late, with US national security advisor John Bolton (widely understood as one of the principal architects of the US invasion of Iraq in 2003) recently referring to Venezuela as one of the “Troika of Tyranny,” part of a “triangle of terror stretching from Havana to Caracas to Managua.”

It is notable in its own right that almost no English-speaking media outlets have picked up the story - indeed more crypto-news outlets have reported on it than traditional ones.

Venezuela also recently set a fixed price of $150 for one PTR token, each of which are purportedly backed by one barrel worth of crude oil - although this is well above the current going price of nearer $60. In the midst of economic hardship in the country, CryptoGlobe recently reported that Localbitcoins transaction volume in the country was “mooning.”

Outside the Circle of Trust

Venezuela joins Iran in launching a nationally-backed cryptocurrency, in an effort to sidestep international (mostly US-based) sanctions. A political rift between the US and EU recently arose, because of the US pressure applied on the SWIFT money transfer platform to exclude sections of the Iranian economy from transacting using the platform. Russia has also been considering a move in this direction of late.

CryptoGlobe reported on the troubles facing the Petro, including the fact that there sems to be no evidence of its use, and claims that its whitepaper was partially plagiarized.

Bitfinex and Tether Fraud Allegations: Analysis, Market Response, Community’s Reaction

On Thursday (April 25), New York Attorney General ("NYAG") Letitia James announced that she had obtained a court order against iFinex (the operator of crypto exchange Bitfinex) and Tether (the issuer of the stablecoin of the same name) to stop these two companies from any "further violations of New York law." This article summarizes the main highlights of the facts as presented by the NYAG, how the crypto markets have reacted, and early responses from some prominent members of the crypto community on Twitter. 

The “Facts” As Presented by Assistant Attorney General Whitehurst’s Affirmation

According to the affirmation filed (at the New York Supreme Court) on Thursday by Brian M. Whitehurst, who is an Assistant Attorney General ("AAG") in the office of NYAG James, here are the main "facts" of the case against Bitfinex and Tether, as beautifully summarized by highly-respected New York-based crypto trader/analyst Alex Krüger (@krugermacro on Twitter):

  • "Bitfinex has a $850M 'hole" since late 2018"
  • "The $850M are 'stuck' with Crypto Capital, a third party payments processor used by Bitfinex"
  • "Crypto Capital argues the $850M have been seized by govt authorities of various countries"
  • "Bitfinex mgmt believes Crypto Capital's principals may be engaged in fraud"
  • "USDT were seemingly fully backed by USD until Nov/2018"
  • "Between Nov/2018 and Mar/2019, Tether transferred $625M to Bitfinex => Tether ceased to be fully backed by USD"
  • "In Mar/2019 Bitfinex 'returned' the $625M to Bitfinex"
  • "Since Mar/2019 Bitfinex is covering the hole with a $900M line of credit from Tether"
  • "The line of credit (which pays 6.5% p.a.) is secured by iFinex shares"
  • "Bitfinex has accessed $700M from the line of credit"
  • "Per the NY AG, Bitfinex and Tether are engaged in fraud"

And here are some other interesting observations from Alex:

Bitfinex's Response 

A few hours after the NYAG's press release came out, Bitfinex issued its response in the form of an announcement posted to its website:

"Earlier today, the New York Attorney General’s office released an order it obtained – without notice or a hearing – in an attempt to compel Bitfinex and Tether to provide certain documents and seeking certain injunctive relief.

The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers.

Bitfinex and Tether have been fully cooperative with the New York Attorney General’s office, as both companies are with all regulators. The New York Attorney General’s office should focus its efforts on trying to aid and support our recovery efforts.

Both Bitfinex and Tether are financially strong – full stop. And both Bitfinex and Tether are committed to fighting this gross overreach by the New York Attorney General’s office against companies that are good corporate citizens and strong supporters of law enforcement. Bitfinex and Tether will vigorously challenge this, and any and all other actions, by the New York Attorney General’s office."

Crypto Markets' Response

Naturally, this news has hurt the price of pretty much all cryptoassets with the main exception being stablecoins that are Tether's main competition, such as USD Coin (USDC) and TrueUSD (TUSD), which have gone up between 1 and 2 percent against USD. 

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What is most interesting about the crypto markets' reaction is that Tether's price has barely been affected this time, unlike in October, when the USDT price reached a low of $0.86. The fair value of Tether is $0.75 at a minimum since Tether seems to be backed 75% by "currency and cash equivalents" and 25% by a loan collateralized by iFinex shares, which used to be worth around $10, but worth around $2 a few hours ago:

This means that the collateral of 60,000,000 iFinex shares might only be worth around $120 million at the moment, whereas the line of credit is for $900 million.

This tweet sums up nicely what one can say about Tether's current fair value:

Crypto Community's Reaction

Here are some of the more interesting early reactions from the crypto community on Twitter:

 

Featured Image Credit: Photo via Pixabay.com