Peru plans to introduce state-backed cryptocurrency

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The South American country of Peru has decided that it’s time to get into the cryptocurrency world. It plans on launching its own digital currency, the PeruCoin, as the country’s official state-backed cryptocurrency. It becomes the second country on the continent to launch a cryptocurrency behind Venezuela and that country’s Petro coin.

The goal of the new cryptocurrency is to see further adoption of crypto among the population and the name was specifically chosen to attract more usage among the citizens. Currently, only about 0.7% of Peruvians own some fore of digital currency. The country worked with Bits2U, a Peruvian crypto cloud mining company, to create the PeruCoin.

Each PeruCoin will have a fixed value of $10. It will be based on ERC20, the Ethereum protocol, and will be financed through an initial coin offering (ICO) to be offered by Bits2U. The company anticipates installing mining farms across the country in order to specifically mine the coin, but hasn’t indicated how many mines could be operational.

Venezuela’s cryptocurrency is already starting to see its way into the crypto space, fueled by a decree by the country’s president, Nicolas Maduro, that several industries must use Petro to do business with the country. For example, oil purchases will have to be made through the crypto. This will apply to all industries—from airlines to shipping—that rely on the country’s oil supply. Additionally, any Venezuelan wanting to apply for a passport must pay the fees in Petro. All banks in the country are required to accept the digital currency, as well.

The idea of a state-backed cryptocurrency isn’t necessarily a welcome one. The main reason cryptocurrency came about was to offer a peer-to-peer cryptocurrency that did not require government intervention. The idea of a cryptocurrency backed by a government that has a “fixed value” of $10 makes one wonder how the coin’s value is going to be maintained since economies are constantly in a state of flux.

Peru’s decision to allow Bits2U to develop the coin should be seen as a potential red flag, as well. The company states clearly on its website, “We provide an online platform, which will allow you to double your investment in just a few months.” Outlandish claims of extraordinary returns are almost always a sign that the company is one that needs to be regarded as a potential source of distress.