No Surprises Here
In the past, the United States would impose economic sanctions on key Venezuelan sectors, like the oil and gas industry, hoping these actions would drive political change. Unsurprisingly, Venezuela felt the impact of these sanctions most heavily.
However, cryptocurrencies are now starting to alter the landscape. What’s happening now, and how might these developments lead to greater adoption of crypto payments, such as Bitcoin and USDT?
Another Round of Sanctions
Venezuela’s oil and gas sector accounts for an astonishing 95% of its exports and 25% of its GDP. This makes the US decision to target PDVSA, the state-run oil company, a potentially crippling blow to the Venezuelan economy.
However, cryptocurrencies present a way to legally bypass these sanctions. How can this be done, and why might it be an especially attractive option?
The Power of Decentralisation
Cryptocurrencies are known for their unique decentralized nature. This is not only appealing to consumers concerned with the control central banks have over their finances, but it’s also practical in terms of faster payments.
Simply put, cryptocurrencies allow large companies like PDVSA to complete transactions without banks acting as intermediaries. Since US sanctions rely on a more traditional financial structure, the crypto ecosystem has become a tempting option to minimize the impact of these sanctions.
We can now begin to understand why PDVSA has moved some of its financial operations to the cryptocurrency sector, especially USDT. There are two primary reasons behind this shift:
- Everyday transactions may be less affected by upcoming sanctions.
- Sales proceeds are less likely to get trapped in international accounts.
This shows that PDVSA is thinking outside the box, but this is not the first time such strategies have been considered.
Previous Attempts
Venezuela has been proactive with cryptocurrencies. In 2018, it launched its own token, the “Petro.” But why haven’t we heard much about it?
The reason is simple: mismanagement and corruption from the start. The Petro experiment was terminated in March 2023, following ten arrests and marking the end of the Petro project.
Is There a Risk with Using USDT?
On the surface, it seems logical for Venezuela’s oil and gas sector to use cryptocurrencies like USDT to bypass US sanctions. After all, the country has already relied on crypto for cross-border transactions, especially since it’s been cut off from many international financial institutions.
However, some risks remain. For example, independent entities can still influence transactions. Tether has already signaled that it will lock out crypto wallets suspected of using USDT to avoid US sanctions.
This is not an idle threat. In fact, 41 crypto wallets linked to Venezuela’s oil and gas sector have already been frozen. So, circumventing sanctions may not be as straightforward as it seems.
What Does This Mean for the Wider Cryptocurrency Community?
These observations are another example of how cryptocurrencies are becoming more integrated into the real world. They are no longer just part of a niche market for savvy investors.
Most analysts believe that cryptocurrencies will continue to grow in terms of functionality and public acceptance. While it’s unclear what will happen if all Tether transactions related to Venezuela’s oil and gas sector are stopped, there’s no doubt that other countries are looking at decentralized finance (DeFi) as an alternative to traditional fiat currencies.
