Venezuela bets on Tether cryptocurrency to skirt oil sanctions

As the United States reimposes oil sanctions on Venezuela, the country’s state oil company PDVSA plans to increase its reliance on digital currencies for crude oil and fuel exports. According to a recent Reuters report.

The U.S. Treasury recently declined to renew the general license and gave PDVSA’s customers and providers until May 31st to close the deal. This move is expected to hindering Venezuela’s efforts to increase oil production and exportsThis is because companies must obtain separate US authorization to do business with this country.

Since last year, PDVSA has been gradually shifting its oil sales to USDT (also known as Tether), a digital currency pegged to the US dollar. PDVSA aims to reduce the risk of sale proceeds being frozen in overseas bank accounts due to oil sanctions, and the return of oil sanctions is accelerating this change.

Venezuelan Petroleum Minister Pedro Telechea acknowledged the use of different currencies in contracts, noting that in some cases digital currencies could become the preferred payment method.

We use different currencies depending on what is written in the contract. […] The only way to make it work is to work with an intermediary, as the USDT trades required by PDVSA do not go through the trader’s compliance department.

Oil trading on Tether (USDT)

Despite the US dollar being the preferred currency for global oil market transactions, PDVSA is moving many spot oil transactions to a contract model that requires half of the value of each cargo to be prepaid in USDT. The company wants new customers to hold cryptocurrencies in digital wallets, even in some older contracts that don’t explicitly mention the use of USDT.

A recent U.S. license has allowed trading companies and former PDVSA customers to resume doing business with Venezuela, but most rely on intermediaries to meet digital trading requirements.

Increasing reliance on intermediaries in transactions could help PDVSA avoid sanctions, but it is likely to result in a reduction in the portion of oil revenue that goes into the company’s coffers.

Telechea remained optimistic about Venezuela’s oil industry, saying PDVSA has “great strength in trade” and is ready to deal with the return of US sanctions. But oil analysts expect Venezuela’s oil production, exports and revenues to reach a plateau soon, even with quick individual approvals from Washington.

Tether’s USDT is the most popular stablecoin, with a market capitalization of nearly $110 billion. According to CoinMarketCap data. The currency is largely used by cryptocurrency users as a way to hedge against volatility, but it is also being used by other parties who have turned traditional financial institutions against the industry.

The United Nations also expressed concern about the increasing use of USDT by money launderers.

Featured image: Ideograms

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