Image: Venezuela's President Nicolas Maduro reads a document during the event launching the new Venezuelan cryptocurrency "Petro" in Caracas (Image by Reuters)

INTERNATIONAL - Crisis-ridden Venezuelan President Nicolás Maduro, announced the launch of an oil-backed crypto-currency in hopes that the move will help avoid the U.S. financial sanctions and bring back to life the country’s failing economy.

In a televised address, Maduro stated that the crypto-currency would be backed by Venezuela's reserves of oil, gasoline, gold, and diamonds.

As the first crypto-currency officially launched by a government,  according to official documents explaining the initiative, it wants Venezuelans to use Petro to make payments to public institutions, including tax payments

Additionally, the documents state that no more than 100 million Petros will be created unless the superintendency for cryptocurrency approves making more after counting holders’ votes. 

The pre-sale of the Petro, which will represent a barrel of crude from a specific division in the country’s Orinoco oil belt.

Investors were offered $60 “tokens” at discounted rates that they can exchange for petros during what is being dubbed an “initial coin offering,” or ICO, in March.

“Today is the day the Petro is born. We are on the world’s financial vanguard. Our response to great problems is great solutions and good will,” President Nicolás Maduro said to media and investors," Maduro said.

He added that the project raised $735 million on the first day. “The game took off successfully”.

US President Donald Trump has issued an executive order to ban Venezuela’s new national cryptocurrency, the petro, from being purchased by Americans or by anyone inside a US territory.

The US Treasury warned domestic investors back in February not to touch petro in case it violated sanctions, saying “the petro digital currency would appear to be an extension of credit to the Venezuelan government” and “could, therefore, expose US persons to legal risk.”

Trump’s order describes the petro’s initial coin offering as “recent actions taken by the Maduro regime to attempt to circumvent US sanctions,” and declares all related transactions unlawful.

His order also makes reference to Venezuela’s National Assembly being in opposition to the launch of the petro. One legislator from the assembly called it “illegal and unconstitutional” on Twitter.

The U.S. Treasury Department also recently told Reuters that buying Petros could be seen as “an extension of credit to the Venezuelan government,” which could violate sanctions and expose U.S. citizens to “legal risks.”

Additionally, Venezuela’s actual national currency, the bolivar, suffers from quadruple-figure inflation, and one Bolivar is currently worth 0.00003 USD.

Lately, Cryptocurrencies such as Bitcoin value's sank to below $10 000 (R119 406.50) in value after reaching an all-time high of $19 783 last December. 

The WorldCoinIndex reportedly showed that the cryptocurrency went down by 8.6%.

Many have warned against cryptocurrencies due to its volatility nature. 

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- BUSINESS REPORT ONLINE