Venezuela's economy is heavily dependent on oil exports. However, doing business through traditional financial institutions has become more difficult due to renewed U.S. sanctions. Going forward, the state-owned oil company Petróleos de Venezuela (PDVSA) plans to rely more on cryptocurrencies.
The US Treasury Department imposed new oil sanctions on Venezuela a week ago, shortly after they had been previously lifted. The goal is to pressure President Nicolás Maduro to democratize the country. PDVSA's business partners have until the end of May to complete transactions under the existing license. In the future, companies will have to wait for individual approvals from the United States, making oil exports more difficult for Venezuela.
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Stablecoins as an alternative means of payment
According to insiders who spoke with Reuters, PDVSA began transitioning to cryptocurrencies a year ago. Transactions are primarily made using the stablecoin Tether (USDT), which is pegged to the U.S. dollar. The new sanctions have accelerated this transition, with the aim of preventing funds in foreign bank accounts from being frozen due to US measures.
"We have different currencies, depending on what the contracts say. [...] In some contracts, digital currencies can be the preferred method of payment." - Pedro Tellechea, Venezuelan Oil Minister
By the end of the first quarter of 2024, Petróleos de Venezuela had converted many spot oil transactions to a contract model that requires half the value of each shipment to be paid in USDT upfront. In addition, new customers are required to hold a certain amount of cryptocurrencies in their digital wallets. This requirement is partially enforced in old contracts that do not explicitly specify the use of USDT.
Venezuela's own cryptocurrency fails
In 2018, Venezuela announced the launch of a pilot project to develop its own cryptocurrency. The "petro" was supposed to be a kind of stablecoin backed by one barrel (159 liters) of the country's oil reserves. It hadn't been planned to go with the offer of traditional stablecoin providers like Tether and Circle. Later, the national currency should have been pegged to the exchange rate of this cryptocurrency.
Exchange transactions between the Bolivar, Venezuela's national currency, and the Petro were only possible through the state-run Patria exchange. In mid-January, the OPEC country quietly ended the project, according to a French news agency.
