Venezuela is dramatically increasing its reliance on cryptocurrencies in response to re-imposed U.S. oil sanctions. PDVSA, the country’s state-run oil giant, is spearheading this shift to cryptocurrencies as a tactic to sidestep the financial blockades affecting its operations. 
The change in strategy was necessitated after the <a href="https://www.cryptopolitan.com/latest-on-us-china-attempts-to-fix-relations/" data-type="post" data-id="514473">U.S.</a> Treasury recently cut off a general license for PDVSA’s trade partners, citing Venezuela’s failure to enact electoral reforms. This directive leaves companies until May 31 to wrap up their transactions, after which they will need to seek individual approvals from the U.S. to continue oil trade with Venezuela. 
In anticipation of these tightened sanctions, PDVSA initiated a gradual shift in 2023, starting to convert oil transaction receipts into USDT, a cryptocurrency pegged to the U.S. dollar. This move was designed to minimize the risk of Venezuelan oil sale proceeds being frozen in international accounts. 
A huge threat under the current sanctions regime. Insiders reveal that the urgency for this transition has intensified due to the recent sanctions, underscoring the need for a stronger adaptation to cryptocurrencies. 
<h2 class="wp-block-heading" id="adjusting-to-a-digital-economy">Adjusting to a Digital Economy</h2> 
“We use different currencies based on our contractual agreements,” stated Venezuelan Oil Minister Pedro Tellechea in a discussion with Reuters. He indicated that moving forward, cryptocurrencies might become the predominant method of payment in certain contracts, reflecting a strategic pivot in how Venezuela handles its oil revenues. 
Globally, the U.S. dollar has been the dominant currency for oil transactions. However, the past year has seen a decline in confidence in the dollar, prompting some countries to explore cryptocurrencies as a viable alternative. 
Although still not widespread, the adoption of cryptocurrencies for oil payments is gaining traction in various regions, suggesting a slow but steady shift away from traditional financial systems. This trend positions Venezuela as a potential leader in the use of cryptocurrencies in the oil sector, potentially influencing other nations facing similar geopolitical challenges. 
Last year, a corruption scandal shook PDVSA, uncovering about $21 billion in untracked receivables from oil exports, some of which were linked to previous cryptocurrency transactions. 
Despite these challenges, Venezuela’s oil exports have surged under Tellechea’s leadership, reaching around 900,000 barrels per day in March — the highest in four years — strengthened by U.S. licenses that facilitated some sales. 
<h2 class="wp-block-heading" id="the-new-norms">The New Norms</h2> 
The first quarter saw PDVSA altering its sales approach, requiring prepayments worth half the cargo’s value in USDT for many spot oil deals that didn’t involve swaps. This new model also mandates that any prospective customer willing to engage in oil transactions must maintain a cryptocurrency wallet, a requirement now being retroactively applied to some existing contracts. 
In October, following a six-month license issued by Washington that allowed resumption of business with former PDVSA customers and trading houses, many had to use intermediaries to comply with these new digital transaction norms. 
“The demands for USDT transactions do not align with typical compliance protocols, necessitating the use of intermediaries,” <a href="https://www.reuters.com/business/finance/venezuela-accelerate-cryptocurrency-shift-oil-sanctions-return-2024-04-22/" rel="nofollow noopener" target="_blank">noted</a> one trader, highlighting the ongoing challenges in adopting cryptocurrency for oil payments. 
PDVSA’s increased reliance on intermediaries, especially for trades with China, aims to mitigate the impact of U.S. secondary sanctions imposed in 2020, which have significantly strained its traditional trading relationships. 
As the U.S. continues to enforce a stringent sanctions regime, Minister Tellechea expressed that Venezuela is gearing up to continue its contract signings and expand oil and gas projects during the 45-day winding down period provided by the U.S. He also mentioned that Venezuela would be prompting potential clients to seek specific licenses post this period. 
Despite some analysts predicting that Venezuela’s oil output and revenue might soon reach their limits due to these sanctions, Tellechea remains optimistic. He believes in PDVSA’s strong trading capabilities and asserts that the company is well-prepared to navigate the complexities of the returning U.S. sanctions.

Venezuela to start using crypto for oil trades

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