Venezuela’s Oil Sales Converted to Cryptocurrency to Avoid Sanctions

As a response to renewed US sanctions, Venezuela has increased the use of digital currencies in oil transactions. PDVSA, the country’s state-owned oil company, has been incorporating cryptocurrency into its payment options for more and more crude and oil shipments in recent years in an effort to avoid freezing foreign earnings from trading. restrictions.

Venezuela’s Exchange for Digital Currency

Following the non-renewal of a general license that enabled extensive trade with Venezuela, the US Treasury has given traders until May 31 to redirect their operations with PDVSA. These changes come at a time when the United States has been pushing for electoral reforms in Venezuela that have not been implemented.

Therefore, PDVSA’s transition to digital currency transactions, that is, USDT (Tether), accelerated. USDT is a stablecoin whose value is backed by the US dollar, providing a low-risk alternative for international transactions.

🚨🇻🇪

VENEZUELA will get rid of the US DOLLAR and will use CRYPTO for all their oil sales

We are watching the collapse of the dollar in real time, and the effects will be huge pic.twitter.com/SnA85Ms85I

— Alex Barnicoat (@mrbarnicoat) April 22, 2024

This strategic shift began in 2023 but has picked up speed following the reintroduction of sanctions. Through the transition to a digital model, PDVSA aims to avoid the problems of traditional banking systems where assets can be seized or blocked, thus obtaining a better flow of income from its oil sales.

Operational Changes and Challenges

PDVSA has had to adjust its working practices for cryptocurrency exchange. For new deals and spots oil contracts, excluding conversion, PDVSA now imposes a 50% advance on the value of each shipment in USDT. These changes also include new customers, who are required to have cryptocurrency in a digital wallet in order to transact with the Venezuelan oil company.

However, such actions are met with challenges. USDT and other digital currencies in oil trading are a rarity in the global market where the dollar still exists. As a result of their non-traditional nature and potential regulatory risks, many businesses and their compliance departments are wary of cryptocurrency transactions.

Therefore, PDVSA often relies on intermediaries who are essential in ensuring that these transactions take place, especially when dealing with large markets like China.

Market Response and Attitude

As PDVSA leads this operational transformation, the world oil market is watching closely. The adoption of cryptocurrencies in the oil business is not widespread, but Venezuela’s decision could serve as an example for other countries with similar economic sanctions.

However, the plan is only successful to the extent that the digital currency is accepted in international trade, especially in large oil-consuming countries.

Venezuela’s oil minister, Pedro Tellechea, is optimistic about the country’s commercial potential and ability to deal with reimposed sanctions. He indicated that Venezuela will continue to sign contracts and expand crude and gas projects during the wind down period mentioned by the United States and will seek private licenses for oil operations after that.

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Kelvin is a well-known writer specializing in crypto and finance, backed by a Bachelor of Science. Recognized for deep analysis and insightful content, he has good command of English and excels in thorough research and timely delivery.

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