New Use Case For Crypto? Venezuela To Trade Oil in USDT

The political relationship between Venezuela and the United States has been rocky for some time…

The American government cites issues such as corruption within the Maduro regime while Venezuela has been at odds with US foreign policy since as far back as the late 1990s.

While these observations aren’t necessarily new, Venezuela has other options at its disposal that weren’t present in the past.

Nothing New Under the Sun

Previously, the US would impose economic sanctions upon major Venezuelan sectors such as the oil and gas industry in the hopes that these actions would result in political changes. Unsurprisingly, Venezuela tended to suffer from the brunt of these effects.

Cryptocurrencies are now beginning to change the state of play. What’s recently been happening and how might these events lead to an even wider adoption of crypto payments – including Bitcoin and USDT – as a whole?

Yet Another Round of Sanctions

Believe it or not, oil and gas comprise an incredible 95% of all Venezuelan exports and a staggering 25% of their GDP. This is why the decision of the United States to target the state-run oil company PDVSA could come as a major blow to the Venezuelan economy.

However, cryptocurrencies provide a way to legally (yes, we said legally) sidestep any sanctions that might soon be imposed. How might this take place and why could it represent an extremely attractive option?

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All About Decentralisation

Cryptocurrencies have always been associated with their unique decentralised nature. Although this is convenient for the average consumer who may be concerned about the amount of influence that institutions such as central banks exert, it’s also practical in terms of speedy payments.

Simply stated, cryptocurrencies allow large companies such as PDVSA to carry out transactions without the need for banks to serve as intermediaries. The fact that United States sanctions rely upon a more traditional financial framework has allowed the crypto ecosystem to represent a tempting option that could blunt the effects of these very same sanctions.

We can now begin to understand why PDVSA has begun to shift its financial operations into the cryptocurrency sector; particularly USDT. There are two main reasons behind this strategy:

• Everyday transactions may not be subject to newly approved sanctions.
• The chances that sales proceeds will be trapped within international accounts is markedly reduced.

So, we can see that PDVSA has begun to think outside of the proverbial box. You might still be surprised that this ins’t the first time such measures have been considered.

Past Experiments

Venezuela hasn’t been sitting on the sidelines in terms of cryptocurrencies. In fact, they actually introduced their own token known as the “Petro” in 2018. Why haven’t we heard more about this groundbreaking move?

Well, for some of the very same reasons that the US wishes to impose sanctions. Petro was tainted by mismanagement and corruption from the very beginning. This ill-conceived experiment was terminated in March 2023; resulting in ten arrests and signalling the death of Petro. Rest in Peace.

Are There Any Inherent Risks Associated with a Shift to USDT?

At first glance, it seems perfectly logical that the Venezuelan oil and gas sector could choose cryptocurrencies such as USDT to avoid US-led sanctions. After all, this country is already highly reliant upon the crypto ecosystem for cross-border transactions and due to the fact that they’ve already been cut off from many international financial institutions.

Some issues still need to be highlighted. For example, independent entities can have an influence upon transactions. This was clearly illustrated in a move by Tether. Tether signalled that it would lock out any crypto wallets that are suspecting of using USDT to avoid United States sanctions.

This is not an empty threat, as 41 crypto wallets linked to the Venezuelan oil and gas sector have already been frozen. In other words, averting the impact of sanctions might not be as simple as it appears.

What Could This Signal for the Larger Cryptocurrency Community?

The observations outlined above are yet another example of how cryptocurrencies have begun to enjoy a firm presence within the real world. They’re no longer limited to a niche marketplace and only a handful of savvy investors.

Most analysts agree that cryptocurrencies will continue to grow in terms of both functionality and public recognition. Although we’re not certain how Venezuela will be affected in the event that all Tether transactions related to the oil and gas sector are halted, there’s little doubt that other countries are eyeing the DeFi ecosystem as an alternative to standard fiat transfers.