US sanctions prompt Venezuela’s PDVSA to boost crypto transactions

In a strategic response to renewed US sanctions on its oil and gas sector, the Venezuelan government is intensifying its utilization of cryptocurrencies, particularly USDT, to navigate economic challenges. Reports indicate that Venezuela’s state-owned oil and gas giant PDVSA is ramping up efforts to incorporate USDT, the leading stablecoin by market capitalization, into its operations as a means to bypass US sanctions.

PDVSA initiated the integration of USDT for oil sales in 2023, and recent developments suggest a proactive shift towards mandating new customers to possess a digital wallet containing cryptocurrency, notably USDT.  This move comes in the wake of the United States’ decision to withhold the renewal of a general license that temporarily eased sanctions on Venezuela’s oil and gas sector. The refusal to extend the license, initially granted in October, was prompted by perceived shortcomings in the Venezuelan government’s commitment to ensuring a transparent and fair electoral process in 2024.

With the absence of renewed sanctions relief, PDVSA faces a looming deadline, requiring its customers and suppliers to conclude transactions by May 31. Failure to meet this deadline could significantly impede Venezuela’s ability to export oil. To mitigate the risks posed by frozen profits in foreign bank accounts due to sanctions, PDVSA aims to escalate the usage of USDT, which was first accepted for transactions in the previous year. In the first quarter of 2024, the company transitioned non-swap spot oil deals to a new contract model, stipulating that half of each cargo’s value be prepaid in USDT.

Furthermore, PDVSA has extended the requirement for digital wallet possession to both new and existing customers, even those with contracts predating the introduction of USDT usage. The reliance on cryptocurrencies for oil and gas transactions represents a departure from conventional practices, where the US dollar reigns supreme. Despite the unconventional nature of crypto transactions in the oil sector, the use of intermediaries is necessary to facilitate USDT transactions, bypassing traditional trade compliance protocols.

However, while circumventing sanctions through intermediary-assisted crypto transactions may offer short-term benefits, it is likely to diminish PDVSA’s oil proceeds in the long run.  This latest maneuver underscores Venezuela’s persistent efforts to leverage cryptocurrency amid economic challenges. Notably, in 2018, the government introduced Petro, a state-backed cryptocurrency tied to oil reserves. Despite initial fanfare, Petro struggled to gain traction and was ultimately phased out in January 2024, signaling the limitations of state-backed crypto initiatives.