Venezuela Chooses USDT to Bypass US Sanctions

Venezuela’s state oil company PDVSA is pivoting to cryptocurrencies, specifically Tether (USDT), to avoid new US sanctions.

The strategic shift is aimed at preventing the country’s oil sales revenues from being frozen in foreign bank accounts. The urgency is growing as the U.S. Treasury tightens its grip on the oil-rich nation over unmet demands for electoral reform.

Challenges that Venezuela’s transition to USDT may face

According to Reuters, the US Treasury announced that it will not renew PDVSA’s general license. Additionally, the U.S. Treasury Department has set a May 31st deadline for PDVSA to wind down its operations.

The decision is part of a broader push by the U.S. government to pressure Venezuela into political change, complicating Venezuela’s efforts to expand oil production and exports. PDVSA’s pivot to USDT reflects the growing trend of integrating cryptocurrencies into global oil trading, although it is still in its infancy, as traditional banking operations shut down.

Venezuelan Oil Minister Pedro Telechea: “According to the contract, we use different currencies.” I got it..

Read more: 9 Best Crypto Wallets to Store Tether (USDT)

Telechea’s remarks highlight the flexibility that PDVSA is integrating into its payment system. The global oil market is primarily traded in US dollars, and the shift to cryptocurrencies has been a notable difference.

PDVSA’s gradual transition to cryptocurrencies began last year, but gained momentum following the reimposition of US sanctions. As a result, by the end of the first quarter, PDVSA had moved much of its spot oil trading to a model that required half of the cargo’s value to be prepaid in USDT.

Additionally, the company requires new customers involved in oil trading to hold virtual currency. PDVSA is also applying this requirement retroactively to some existing contracts.

However, this change also comes with challenges. The use of USDT for large-scale transactions such as oil sales is still rare, and there is skepticism within the trading sector.

“USDT trades as required by PDVSA do not go through the trader’s compliance department, so the only way to make the trade work is to work with an intermediary,” said an oil trader.

While necessary to meet digital trading requirements, this reliance on intermediaries could mean a smaller portion of the oil revenue reaching PDVSA’s account as the intermediaries receive a cut.

The effectiveness and safety of using cryptocurrencies like USDT to evade sanctions is under scrutiny.

Tether has been proactive in freezing accounts related to OFAC violations, demonstrating its compliance stance in line with U.S. regulations. Additionally, the traceability of blockchain transactions adds further complexity and the potential to expose illegal activities.

Read more: 8 Best On-Chain Analytics Tools of 2024

Guillermo Fernandez, founder of blockchain analysis firm Blockpliance, expressed skepticism about the immediate adoption of cryptocurrencies for such purposes.

“We understand that virtual currencies bring many benefits to international oil trade, but without first establishing a local regulatory framework and a national coordinating body that can address and publicize an effective balance of payments for domestic oil, Venezuela It is difficult to justify turning to virtual currency systems.” ” Fernandez told BeInCrypto.

However, Telecare is optimistic about Venezuela’s ability to overcome sanctions and expand oil and gas projects.

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