The Venezuelan government has declared that the Petro cryptocurrency will be auctioned to private companies through the Dicom foreign exchange platform within the next few weeks.
As reported by Reuters, Vice President Tareck El Aissami said that firms will be able to use the Petro token to pay for raw materials, and "the Petro is going to be our powerful international currency, above the dollar."
This is some statement to make, especially as the country's local currency, the bolivar, has sunk at an unprecedented rate against the US dollar in recent years.
In the past 24 months, the dollar has risen 10,768 percent against the bolivar, largely due to Venezuela's economic crisis and sanctions imposed by the US due to allegations of government corruption.
The Petro has been touted as the way out of the country's economic problems.
In December, Venezuelan President Nicolas Maduro said that the new state-owned cryptocurrency will be backed by physical assets including rare earths, oil, and gas.
The new token was sold in private auctions last month, in which Maduro insisted that $735 million had been raised.
However, no facts, figures, or evidence have been revealed, and investors have not disclosed their purchases publicly.
While the country's president says the Petro will help Venezuela circumvent US sanctions and therefore provide a much-needed boost to local businesses and funds, opposition critics in the country's government have called the Petro an illegal debt issue.
In addition, the US Treasury is also investigating whether or not the cryptocurrency issuance violates sanctions, and has warned investors that purchasing the Petro may constitute a legal risk.
El Aissami has asked local banks to purchase the Petro, which can be acquired at a discount until 20 March with "dollars, euros, or any other currency."
However, the simple lack of information, legal backing, planning, and assurances for investors should be a red flag.
Cryptocurrencies in themselves have merit and are being experimented with in countries where members of the general public cannot have access to banking services, but this may be the first example of virtual coins being used as a legal and economic maneuver by a government.
The only substantial information on offer is that the Petro will be limited to 100 million tokens, valued at approximately $6 billion, and each token will be backed by one barrel of crude oil.
This is not enough and investors should be wary. Unless facts are offered, structures are put in place to manage the conversion of fiat currency to Petro -- and potentially reverse investment -- and legal issues are dealt with, the project may collapse before Venezuela enjoys any benefit.