Venezuela to Ramp Up Use of Crypto to Counter Oil Sanctions – CryptoCurrencyWire

Venezuela’s state-owned oil company, PDVSA, is gearing up to ramp up digital currency use in its exports of fuel and crude oil amid renewed oil sanctions imposed by the United States, according to three individuals aware of the strategy. Recently, the U.S. Department of Treasury set a deadline of May 31, 2024, for PDVSA suppliers and clients to conclude transactions under the nonrenewed general license, citing the absence of electoral reforms. This action makes it more difficult for Venezuela to increase oil production and exports since it now requires specific U.S. licenses for companies to do business with the nation.

PDVSA had already been gradually transitioning its oil transactions to USDT, whose worth is tethered to the U.S. dollar (USD), thus maintaining stability. This shift has been expedited by the reinstatement of sanctions, which are intended to reduce the possibility that sales revenues may be blocked from foreign bank accounts.

According to the nation’s oil minister, Pedro Tellechea, contracts stipulate various currencies for transactions, indicating that digital currencies may be preferred in certain agreements. While the US dollar remains the dominant currency for international oil transactions, crypto payments are gaining traction in some regions, although they are not yet commonplace.

Tether, the issuer of USDT, has stated that it is committed to complying with U.S. sanctions and is working to promptly freeze sanctioned addresses.

PDVSA faced corruption allegations last year involving approximately $21 billion in unexplained receivables from oil shipments in recent years, partly linked to previous transactions involving alternative cryptos.

Led by Tellechea, Venezuela’s oil exports have increased dramatically; in March, the company reached more than 900,000 barrels daily, the most in recent years, helped by U.S. permits allowing sales. PDVSA has shifted many spot oil transactions to a contract mechanism, requiring a USDT prepayment equal to one-half of each cargo’s worth.

Moreover, PDVSA now requires that new customers intending to transact oil must be crypto holders, even retroactively imposing this requirement on existing contracts not initially specifying payment in crypto. In response to the six-month license issued by Washington last October, facilitating trade with Venezuela, most entities relied on intermediaries to fulfill transactions.

PDVSA has increasingly relied on intermediaries for its oil sales, particularly with China, since the imposition of secondary sanctions by the United States in 2020 disrupted its relationships with major trading partners. While relying on intermediaries may enable PDVSA to work around sanctions, it also means a lower share of oil proceeds will accrue directly to the company.

Tellechea remains optimistic, asserting that Venezuela will continue building its gas and oil projects and entering into contracts within the 45-day, wind-down time set by the United States, after which it will pursue specific permits from possible customers.

Despite analysts’ predictions of limitations on oil production, revenue and exports due to sanctions, Tellechea maintains that the nation is commercially prepared to navigate the reinstated sanctions imposed by Washington.

As more countries look to integrate cryptos into their financial systems, the industry is likely to grow at a faster rate with a commensurate growth level for companies across the board, such as Marathon Digital Holdings Inc. (NASDAQ: MARA).

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