Venezuela is moving more quickly toward cryptocurrencies as oil sanctions are reinstated

As the US reimposes oil sanctions on Venezuela, the nation’s state-owned oil corporation, PDVSA, plans to employ more cryptocurrency in its gasoline and crude shipments, according to people familiar with the situation that Reuters reported.

PDVSA’s suppliers and clients have until May 31 to complete transactions in response to the US Treasury Department’s decision not to renew a general license because of inadequate electoral reforms. This decision paves the way for a significant change in payment methods.

The resurgence of oil sanctions poses a challenge to Venezuela’s efforts to enhance its oil production and exports. Consequently, PDVSA has accelerated its shift to digital currencies, namely USDT, in order to reduce the possibility of its revenues being blocked in foreign bank accounts.

According to contractual agreements, Venezuela’s Oil Minister Pedro Tellechea acknowledged the use of many currencies, including virtual ones.

With an emphasis on USDT, a stablecoin correlated with the US dollar, PDVSA’s slow shift to digital currencies gained traction last year.

This move is accelerated by the latest sanctions escalation, which PDVSA is using to protect its income sources from any interruptions brought on by US-imposed restrictive measures.

Significantly, the shift to digital currencies seeks to allay worries raised by a corruption scandal that shook PDVSA earlier this year. The case included $21 billion in unpaid receivables, some of which were connected to transactions using other cryptocurrencies.

Venezuela’s oil exports enjoyed a comeback under Minister Tellechea’s direction, hitting a four-year high of over 900,000 barrels per day in March.

PDVSA moved away from typical spot oil agreements and adopted a contractual approach that required prepayment in USDT for half of each cargo’s worth in order to comply with regulatory requirements and market dynamics.

Additionally, in order to trade oil with PDVSA, new clients must keep cryptocurrency in a digital wallet; this requirement is enforced even in contracts that do not specifically mention the usage of USDT.

Although the aforementioned procedures are intended to adapt to changing payment preferences, traders have expressed difficulties in meeting PDVSA’s USDT transaction requirements, which often necessitate the use of intermediaries to streamline transactions.

Even if it comes with less money from oil sales, PDVSA may avoid restrictions by using middlemen for oil transactions, especially when combined with US sanctions.

Minister Tellechea expressed confidence in PDVSA’s trading capacity and its readiness to handle difficult market circumstances, and he is hopeful about Venezuela’s ability to withstand more sanctions.

Though the US may provide specific authorizations, oil experts anticipate that Venezuela’s oil production, exports, and income may face constraints.