Venezuela’s economy has continued to deteriorate, to the point of collapse as many of its people have fled to neighbouring countries like Brazil. The situation for its people is growing increasingly dangerous, as 85% of necessary medical supplies are in short supply, while the number of medical professionals has diminished.

Its currency, the bolivar, has undergone monumental hyperinflation, nearing 8,000 percent, with few smart ideas coming from the administration as to how to fix it. In the words of Forbes magazine’s Simon Constable, the administration demonstrates a ‘Special kind of Stupid‘. From cutting zeroes off of its native bolivars, to the rollout of its oil-backed cryptocurrency: the Petro (PTR).

While cutting zeroes off bolivars appears to be a faulty counter to hyperinflation, the Petro has been shrouded in controversy since its initial coin offering (ICO) entered the market on March 20. As an ICO, it’s ratings alongside contemporaries are terrible; garnering a 4.5 rating compared to an average range of 8.0-9.7. But what is it that’s dragging the Petro down? And what’s the risk behind it?

Dry Cleaning Crypto?

The reputation and legitimacy of any government are placed on its conduct towards its economy. Unfortunately for Venezuela’s Socialist government, its reputation has been profoundly damaged. According to Reuters, more than 50 of its members, including major political figures like President Maduro and his second in command, Diosdado Cabello, have been been considered “high risk” for money laundering.

The irony lies in the fact that the now sitting socialist government has, for decades, vowed to combat corruption. This, only to have its leading members and representatives not combatting, but participating in it.

So where does the Petro come into this? Political opponents and external powers have, for a while, rallied against the administration for corruption. Its opponents see this ICO as an avenue for the government to conduct illicit activities under the guise of an oil-backed cryptocurrency.

Rafael Guzmán, acting president of the country’s finance committee, has slammed the token sale as a non-solution:

“This deepens the crisis that we are living in. The PTR is another [example] of corruption, and we will come out of this crisis with measures that we have announced from this Parliament.”

Crypto Exchanges Turning Their Backs

Popular cryptocurrency exchange Bitfinex has refused to list the Petro. This refusal is due to one of the controversies enveloping it, as Bitfinex suspects the oil-backed crypto will be used in order to work around international sanctions.

According to the company’s statement, the US’ ban on any citizens from buying into the ICO means that Bitfinex’s hands are tied. The move could set a precedent for other exchanges to follow, especially considering the dent in the reputation crypto exchanges endured this first quarter.

Fraud From The Offset

Venezuela’s President, Nicholas Maduro, has acted to erode Petro’s already fragmenting credibility after his comments on the ICO. Telesur reports the socialist president claims the offering already raised $5 billion from investors.

This statement has since been uncovered as false, as that amount goes beyond the value ($60) and the number of tokens available for sale (38,400,000). These figures would put the maximum raiseable amount at $2.3 billion, less than half of Maduro’s inflated statement.

Concerns are still rife as to the petro’s use as money after it’s been successfully sold. While some claim its token sale has already brought in $735 million, suspicion continues to blanket the cryptocurrency as it enters its second week on the market.