Key points
- Venezuela is increasingly allowing the use of dollar-pegged cryptocurrencies, primarily USDT (Tether), in private sector currency exchanges.
- This shift is a response to reduced US dollar availability due to US sanctions and restrictions on oil exports.
- The use of cryptocurrencies helps maintain economic activity, particularly in the production of essential goods and services.
- State-run oil company PDVSA has been gradually increasing its use of digital currencies.
Venezuela’s struggling economy is increasingly relying on dollar-pegged cryptocurrencies to navigate the challenges imposed by US sanctions and a decline in oil revenue. With US restrictions on oil exports limiting the flow of US dollars into the country, the Venezuelan government has quietly expanded the use of Tether (USDT), a stablecoin pegged to the US dollar, in private sector currency exchanges.
This move, confirmed by a dozen anonymous sources within the financial and business sectors, allows businesses to circumvent the difficulties of obtaining US dollars through traditional channels.
The sanctions, described by the Venezuelan government as “economic war,” significantly hinder business transactions, making it difficult for companies to purchase essential raw materials from abroad. The recent restricted license granted to Chevron, which allows some oil exports, prohibits payments to the Venezuelan government, further exacerbating the country’s dollar shortage.
Consequently, the increased adoption of USDT offers a crucial alternative for businesses seeking to conduct international trade and maintain operations.
The adoption of cryptocurrencies has been a gradual process. Sources indicate that state-run oil company PDVSA has been progressively shifting towards digital currency transactions since last year. While the central bank and relevant ministries have not publicly commented, Vice President Delcy Rodriguez alluded to the implementation of “non-traditional mechanisms” in the exchange market, suggesting the growing role of cryptocurrencies.
Although limited, a small number of banks now facilitate the exchange of bolivars for USDT, with businesses needing government-approved digital wallets to participate.
Despite the lack of official figures, estimates from the local analytics firm Ecoanalitica suggest that $119 million in cryptocurrencies were sold to the private sector in July alone. This underscores the growing significance of crypto in Venezuela’s economy, particularly as the reduced oil exports continue to strain the availability of foreign currency.
Analysts predict this trend will likely continue given the ongoing limitations on traditional foreign exchange mechanisms.
