Venezuela Looks to Crypto to Bypass US Sanctions

Venezuela’s state-owned oil company, PDVSA, is looking to crypto as a means to bypass new sanctions placed on it by the US, Reuters reported.

The US Treasury Department last week gave PDVSA’s customers and providers until May 31 to wind down transactions under a general license it did not renew due to a lack of electoral reforms.

The move will make it more difficult for the country to increase oil output and exports as companies will have to wait for individual US authorizations to do business with Venezuela, Reuters said.

PDVSA since last year had been slowly moving oil sales to USDT, a digital currency also known as Tether whose value is pegged to the US dollar and designed to maintain a stable value. The return of oil sanctions is speeding up the shift, a move to reduce the risk of sale proceeds getting frozen in foreign bank accounts due to the measures, per Reuters.

“We have different currencies, according to what is stated in contracts,” Venezuelan oil minister Pedro Tellechea told Reuters last week, adding that in some contracts digital currencies might be the preferred payment method.

The US dollar is the preferred currency for transactions in the global oil market. Even though they are emerging in some countries, payments in cryptocurrency are not frequent.

Tether said in an email it respects the US Treasury’s list of sanctioned entities and “is committed to working to ensure sanction addresses are frozen promptly.”

Venezuela looks to crypto

Last year, PDVSA was rocked by a corruption scandal after the discovery of some $21 billion in unaccounted receivables for oil exports in recent years, partially related to prior transactions involving other cryptocurrencies.

The nation’s oil exports have increased under Tellechea, who took over Venezuela’s oil ministry following the scandal. Encouraged by U.S. licenses allowing sales, exports reached some 900,000 barrels per day in March, the highest in four years.

By the end of the first quarter, PDVSA had moved many spot oil deals not involving swaps to a contract model demanding prepayment for half of each cargo’s value in USDT.

PDVSA also is requiring any new customer applying to conduct oil transactions to hold cryptocurrency in a digital wallet.

In October, when Washington issued the six-month license that allowed trading houses and former PDVSA customers to resume business with Venezuela, most of them resorted to intermediaries to meet the digital transaction requirements.

“USDT transactions, as PDVSA is demanding them to be, don’t pass any trader’s compliance department, so the only way to make it work is working with an intermediary,” one trader told Reuters, referring to how unusual it still is to pay for oil in digital currencies.

PDVSA has relied on middlemen for its own oil sales, especially to China, since the US in 2020 imposed secondary sanctions on Venezuela, disrupting its relationship with large trading partners.

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