Special Report: In Venezuela, the new cryptocurrency is nowhere to be found

ATAPIRIRE, Venezuela (Reuters) – According to the Venezuelan left president Nicolas Maduro, this remote village of 1,300 souls is perched on the cutting edge of an innovation in cryptocurrency.

A cow stands next to a puddle of an abandoned fish farm near Atapirire, Venezuela, 10 May 2018. Photo taken 10 May 2018. REUTERS / William Urdaneta

Located in a secluded savannah in the center of the country, Atapirire is the only city in an area that the government says is rich in 5 billion barrels of oil. Venezuela has promised these reserves as support for a digital currency dubbed "petro", launched by Maduro in February. This month he swore that it would be the cornerstone of a recovery plan for the nation affected by the crisis.

But the inhabitants of Atapirire say they have not seen any effort on the part of the government to exploit those reserves. And they have little faith that their warring village has a front row seat for a revolution in finance.

"There is no sign of that petro here," said housewife Igdalia Diaz. He threw himself into a diatribe about the crumbling school of his city, pitted streets, frequent blackouts and perennially hungry citizens.

It turns out that the petro of Venezuela is difficult to identify almost everywhere. For a period of four months, Reuters talked to a dozen experts in cryptocurrencies and oilfield valuations, traveled to the site of committed oil reserves and scoured the digital money transaction records in an effort to find out more.

The hunt revealed little evidence of a thriving petro trade. The currency is not sold on any of the major cryptocurrant trade. No shop is known to accept it.

The few buyers that Reuters could identify were those who had published their experiences on online cryptocurrency forums. Nobody would identify himself. One complained about being "cheated". Another told Reuters he had received his tokens without problems; he blamed US sanctions against Venezuela and the "terrible press" for injuring petro's debut.

Senior government officials have issued contradictory statements. Maduro claims that petro sales have already raised $ 3.3 billion and that the currency is used to pay for imports. But Hugbel Roa, a government minister involved in the project, told Reuters that the technology behind the currency is still under development and that "nobody has been able to use the petro … nor have any resources been received".

The Superintendency of Cryptoassets, the government agency that oversees the petro, is a mystery. Recently Reuters visited the Ministry of Finance, where the Soprintendenza is supposed to be housed, but was informed by a receptionist who "does not yet have a physical presence here".

The Soprintendenza website does not work. Its president, Joselit Ramirez, did not respond to messages about his personal accounts on social media. Calls to the Ministry of Industry, which oversees the agency, have remained unanswered.

The Ministry of Information did not respond to emails looking for comments.

Maduro added to the confusion this month by announcing that salaries, pensions and the exchange rate for the decimated currency of Venezuela, the bolivar, are now anchored to the petro. That move has caused confusion in the streets of Venezuela and among economists and cryptocurrency experts who claim that the Bolivian oil chain is impractical.

"There is no way to link prices or exchange rates to a token that does not trade, just because there is no way of knowing what it sells for," said Alejandro Machado, a Venezuelan computer scientist and cryptocurrency consultant who followed the petro closely.

The chaos speaks of the desperation and disorganization that grips the government of Maduro while Venezuela dissolves.

The petro was supposed to help his administration overcome the hyperinflation that made the bolivar all but useless. He promised that a cryptocurrency, which allows for anonymous financial transactions, would allow Venezuela to undermine US financial sanctions and increase the strong currency.

The government added the value of the petro to the price of a Venezuelan oil barrel – currently about $ 66 – and promised to support it with crude oil reserves located in an area of ​​380 square kilometers (147 square miles) surrounding Atapirire. The president of the United States, Donald Trump, in March, banned Americans from buying or using petro.

Analysts are skeptical about Maduro's claims that the petro has already brought billions in hard currency. They say that the digital records associated with the initial offer of coins, or ICO, do not provide sufficient information to determine how much, if anything, has actually been raised.

"This certainly does not look like a typical ICO, given the low level of transaction activity," said Tom Robinson, chief data officer and co-founder of Elliptic, a London-based blockchain data company. "We did not find any evidence that someone ever issued a petro, or that it was actively traded on an exchange."

A visit from Reuters to the area around Atapirire, meanwhile, showed little oil industry activity. The only visible platforms were small and old machines installed years ago. Many were abandoned and covered with weeds.

In an opinion paper published on August 19 on Aporrea, an online website of Venezuelan analysis and commentary, former Oil Minister Rafael Ramirez estimated that it would take at least $ 20 billion of investment to exploit reserves, money that the turbulent state oil company of Venezuela PDVSA does not have.

"The petro is set to an arbitrary value, which exists only in the government's imagination," wrote Ramirez. He oversaw the nation's oil industry for a decade under the late president Hugo Chavez. Ramirez is now in exile in an unknown location after being accused of corruption by the Venezuelan government, accusations he denies.

A woman walks near the enclosure of an abandoned fish farm near Atapirire, Venezuela, 10 May 2018. Photo taken on 10 May 2018. REUTERS / William Urdaneta

PDVSA did not respond to an e-mail looking of comments.

"WE GOT SCAMMED"

Contrary to buyers of known cryptocurrencies like Bitcoin or Ethereum, oil owners are hard to find.

A meeting place is an online cryptocurrency forum called Bitcointalk, where fans started posting messages at the start of 2018.

Some initial posts were bullish. But that optimism became exacerbated over time. Several participants complained about the lack of information and delays in getting their coins. One complained about not being able to transfer or sell tokens.

"From now on yes we have been cheated, time will tell us if it was a good investment or not", a forum participant identified as cryptoviagra wrote on June 25

Another buyer, l & # 39; unique to respond to Reuters questions, according to social media messages, said his experience in the purchase of oil "worked quite well overall." He blamed the US ban to depress petro sales, along with what he saw as negative media coverage. He demanded that his name be withheld because he feared "persecution" by the US government, adding that "I do not consider Reuters to be an honest news agency".

Reuters was unable to confirm whether or not forum participants had invested in the petro.

Cryptocurrencies have gained popularity in the last decade, led by supporters who said they would lower the costs of financial transactions by offering citizens alternative to commercial banks and protecting them from central bank policy-induced inflation .

Transactions are validated by a computer network and registered on a public ledger called a blockchain. Individual operations are available for anyone to see on the Internet, but the identities of those involved are kept secret. Operations are protected by cryptography, computerized coding and data decryption.

Feverish purchases of cryptographic assets in 2017 pushed the price of Bitcoin to nearly $ 20,000. His success has fueled a wave of coin deals from other start-ups, including scams that have raised millions of dollars before being shattered by the authorities.

Cryptocurrency issuers seeking to provide transparency in fundraising use blockchain registries to show every single purchase of the new currency. This gives potential investors the feeling of how much money is flowing and provides a relative indicator of demand.

The Venezuelan government, by contrast, did not provide a register of purchases.

The petro "white paper", a public document describing the terms of supply to potential buyers, states that the main money platform is NEM, a decentralized blockchain network promoted by an organization non-profit based in Singapore. The owners of NEM accounts are anonymous, but they can reveal their identity in the description of their coins, if they wish.

In March, an NEM account that claims to be managed by the Venezuelan government issued 82.4 million tokens as part of an ICO associated with a digital currency described as petro. Those seemed to correspond to a series of "preliminary" coins described in the white paper that buyers could subsequently exchange for oils once the ICO was complete.

Approximately 2,300 of those tokens were transferred to 200 anonymous accounts in small quantities at the beginning of May, as NEM records show.

That period of time is consistent with the comments posted by the Bitcointalk forum participants who said they were buying petros. If sold at the price set by Maduro on the basis of oil prices at the time, the sale of those tokens could have generated about $ 150,000, according to Reuters calculations.

In April, another anonymous NEM account issued a different token set that described it as part of a separate phase of the petro aimed at major investors.

That June account transferred a total of about 13 million tokens to about a dozen anonymous accounts, as the NEM records show. The sale of those tokens could have generated around $ 850 million at official prices. But there is no way to verify that those were sales, and no major investor has admitted to take a position in the petro.

Roa, the minister of higher education, oversees a state agency called the Venezuelan Blockchain Observatory. It seemed to validate the analysts' suspicions that the petro, at the moment, did not exist as a functioning currency.

Reuters spoke briefly with him on the sidelines of a petro event in Caracas last week. Roa described NEM transactions as "early models", adding that Venezuela was now working on its blockchain technology. He said that buyers made "reservations" to buy petros, but that no coins were released.

What is clear is that petro does not trade on any of the major cryptocurrant exchanges.

Slideshow (7 Images)

Bitfinex, headquartered in Hong Kong, one of the largest world trade in volumes, in March said it never wanted to list the petro because of its "limited usefulness". the token from its platform following US sanctions.

Three other important exchanges – San Francisco-based Coinbase based in San Francisco, Bittrex based in Seattle and Kraken based in San Francisco – declined to comment or did not answer questions about why they did not list petro.

Maduro, on April 26, announced that 16 exchanges had been "certified" to trade the petro, adding that "they are starting to operate today". Most are little known in the cryptic world.

Reuters could not locate seven of the exchanges, which had no presence on the Internet. Seven others did not respond to requests for comment. Italcambio, a consolidated exchange of Venezuelan currencies that Maduro said would exchange the currency, has not managed or sold petros, said its president Carlos Dorado in an email response to Reuters.

The only exchange that publicly discussed plans to list the petro is India's Coinsecure.

In an interview with Reuters earlier this month, CEO Mohit Kalra said that Coinsecure within two months would provide Venezuela an exchange for the oil business, along with technology to manage it, and that Venezuela would pay royalties for its use.

Kalra did not answer calls for more information.

& # 39; WHAT IS A PETRO? & # 39;

Oil is the heart of the Venezuelan economy. In choosing to support its petro with oil, the country has joined a small but growing number of cryptocurrency issuers that link the value of their tokens to physical assets.

The Royal Mint, which produces coins for the United Kingdom, in 2017 announced a digital currency with golden support called RMG. Other tokens that are supported by diamonds have emerged.

The big difference is that cryptocurrencies are linked to physical goods that can be easily exchanged. On the contrary, Maduro promised that the petro would be supported by oil reserves that still lie underground near Atapirire in a block known as Ayacucho I.

The government claims that the area holds 5.3 billion barrels , citing an "independent international certification body." PDVSA did not respond to an email looking for details.

No matter how much oil it holds, the area lacks crucial infrastructure to get it out of the ground, including roads, oil pipelines and power generation, said Francisco Monaldi, a native of Venezuela who now teaches energy policy in the area. Latin America at the Rice University in Houston.

"There is no investment plan for this area and there is no reason to think it would be developed before other fields with better conditions," he said.

The identification of the block requires significant effort.

PDVSA employees who agreed to take a journalist confused them with another block. Reuters had to map Ayacucho I with GPS software using the coordinates published by the government as part of petro creation.

Meanwhile in Atapirire, residents say they have been forgotten.

A fish farm that used to provide work is now abandoned. The city clinic does not have a doctor or a functioning ambulance. Many spend hours waiting along the dusty road for the Chinese-made buses serving as the only public transit to El Tigre, an important oil hub located 60 kilometers (37 miles) north.

Professor Rosa Alvarez said that about half of her first grade class had stopped showing up because they were hungry and the school no longer provides state-sponsored meals.

He says government officials have ignored his complaints. But in May the Ministry of Education established a new mandate: to teach students the virtues of the new Venezuelan cryptocurrency.

Standing in front of a white table at the start of this year, while his students giggled and chatted, Alvarez said he was perplexed.

"How will I explain to them if no one will tell me what a petro is?" He said. "How can I buy a petro? With what?"

Other reports by Anna Irrera in New York, Nidhi Verma in New Delhi and Maria Ramirez in Altagracia del Caris; Editing by Marla Dickerson

Our standards: The Thomson Reuters Trust Principles.
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