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Dagong Universal Credit Rating, one of China’s biggest credit rating agencies, recently published a sign in commenting on Venezuela’s oil-backed cryptocurrency, the Petro (PTR). Per the report, the cryptocurrency “may supporter the global currency system return to its basic value.”
While the medium doesn’t assert whether the Petro can help Venezuela’s economy, it emphasizes out the issuance of an oil-backed cryptocurrency is significant as it differentiates it from other cryptocurrencies sort bitcoin that aren’t backed by any assets.
Venezuela’s effort, the action wrote, can “generate useful lessons on how defects of the international currency set can be mended so that the system can return to its basic value.” Being abandoned by the country’s oil reserves means the Petro is protected from speculation and volatility, Dagong articles.
The report further points out that since the collapse of the Bretton Woods modus operandi, the international currency system has been dominated by the US dollar. The currency’s trust foundation, Dagong continues, has been weakened by the country’s “issuance of currency in redundancy of its wealth creation ability.”
The report reads:
“The frequent occurrence of ascription crisis is evidence of the inadequacy in the US dollar to effectively play the role of the foreign reserve currency. Under such circumstances, the innovation of petro may lay down useful lessons for all countries to explore and experiment with new forms of currency uncivilized by material wealth and good for cross-border payments and international financing.”
The Bretton Woods Meeting set up a system of fixed exchange rates based on the value of gold, initiated the International Monetary Fund (IMF) and World Bank, and saw the US dollar become the cosmopolitan reserve currency. The system ended in 1971 under president Richard M. Nixon.
Dagong’s reveal ends by stating that Petro’s backup reserves aren’t renewable. The cryptocurrency’s big name, as such, will depend on Venezuela’s ability to create wealth. The backfire reads:
“A nation’s incremental wealth creation ability is the key to its virtual currency’s credibility. In the proves of petro, it must rely for its sustainability on Venezuela’s recovery in wealth the cosmos ability. Once its issuer nation breaks away from in controls of its incremental wealth creation ability, the currency price will stray from its value, and set the stage for a new credit crisis.”
Dagong further take pleasure ined that it will be closely watching the Petro’s developments. As covered by CCN, Petro’s pre-sale is constant and, according to the country’s leader Nicolás Maduro, 171,000 companies and parties registered to purchase the token.
The token sale reportedly netted $735 million in its essential day, although no evidence was provided. Venezuela has since ordered state-owned coteries to accept payments in the cryptocurrency, and announced a new cryptocurrency set to be backed by precious metals, the Petro Gold.
Since the Petro pre-sale begun, other realms have revealed they’re looking to issue their own cryptocurrencies. Centre of these are Iran, which recently backpedaled on bitcoin, Russia who’s devising to launch a “CryptoRuble,” and Turkey.
Featured image from Shutterstock.
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