Reader TTS

But why would the government of a financially crippled state look to bitcoin technology for a solution to their financial problems?  Matthew Newton, Analyst at eToro, told Express.co.uk that

the Venezuelan government is looking to take advantage of one of the key features of cryptocurrencies – decentralisation. He said: "Through ICOs, cryptocurrencies have shown that

start-ups have been able to circumvent traditional finance and fundraising by reaching a global audience through technology and pitching their ideas directly. “With Petro, we are witnessing

this opportunism on a much grander scale, and the first of its kind.” Mr Newton adds that other sanctioned nations will be watching closely as the Petro could set a precedent. Michael

Harris, Director of Financial Crime Compliance at LexisNexis Risk Solutions, spoke to Express.co.uk about how digital currencies can be used to evade international sanctions. Mr Harris

believes, so-called “bad actors" could evade international sanctions by exploiting the anonymity of the distributed ledger technology beneath some cryptocurrencies. He said: "This

high degree of anonymity makes it possible to transfer huge sums of money across jurisdictional borders without detection." On the Petro, Mr Harris said, that if all goes ahead as

planned and the Venezuelan government manages to raise a considerable amount from investors, this could bring more international scrutiny from regulators. Mr Bianchi agrees that the

underlying logic of Venezuela’s ICO is to get around the financial sanctions imposed by the US and Europe. He further warns this is the biggest ICO ever proposed, and if the ICO reaches the

proposed cap, around $5bn, this will represent about five percent of the entire total of Ethereum currently circulating and will almost equal the total revenue generated by ICOs in 2017. He

said: “Although it is allegedly backed by the price of Venezuela’s oil reserves, there is no reason why a rational investor should put money into it. “The country is fighting quadruple-digit

inflation with crude oil production down about 29 percent in 2017. “Venezuela is arguably defaulting on its debts, and unless one really believes that this is merely due to outside

financial sanctions, there is no reason why this could not happen with the Petro as well.” Mr Bianchi says that the very fact Petro is being backed by oil is also somewhat questionable. He

said: “Sure, there is a reference to the price of oil in the white paper concerning the official rate offered by exchanges. However, there is quite a substantial degree of subjectivity in

the way the formulation for the exchange rate is settled which, if anything, it is fair to think will be used by a defaulting government at its own advantage.” The Petro experiment certainly

represents another milestone event in the ICO universe. However, Mr Bianchi adds that it looks more an attempt to raise funds, “out of desperation” than an actual attempt to re-introduce a

digital currency backed by a hard commodity.