Posted 2 years ago | by Ben Armstrong
Venezuela Looks to Bitcoin for Trade Settlement, Reserve Asset
According to reports in US media, Venezuela's state-owned oil company, Petroleos de Venezuela SA (PDVSA), asked the nation's central bank to look into how Bitcoin (BTC) could be used in international trade.
The South American nation has been struggling with a declining economy as well as sanctions from the United States, which has traditionally been a major consumer of Venezuelan crude.
After the strict US sanctions were imposed earlier this year, Venezuela has seen its crude oil shipments collapse and has also had trouble accessing the global financial system. Venezuelan President Nicolas Maduro introduced one of the first state-backed cryptos, the Petro, but it has gone unused in the global market.
Venezuela's Bitcoin Gambit May be Risky
The idea of using cryptos to skirt sanctions may seem like a good idea in theory, but there are numerous problems that emerge when a realistic implementation is considered. One of the biggest is who Venezuela is trading oil with, and how those nations view cryptos.
After the US dropped its purchases of Venezuelan crude oil to near zero, the largest buyers became China, India, and the EU. China and India have taken a harsh stance towards the use of cryptos domestically, so it is unlikely the nations would allow the use of BTC to settle oil trades.
Of course, the use of any system to get around US sanction will be seen as illegal by the USA, who may attempt to sanction any nation or company that continues trading with Venezuela. On the crypto side, the use of the world largest tokens as an 'illegal' alternative to the established Western financial system could be bad for the market as a whole.
Heat on the Crypto Markets
US Treasury Secretary, Steven Mnuchin, has already said this of cryptos:
“This is indeed a national security issue… Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking,”
If BTC becomes the go-to sanction buster for nations on the US sanctions list, cryptos are likely to gain a spotty reputation.
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity....
— Donald J. Trump (@realDonaldTrump) July 12, 2019
At the moment, there are numerous exchanges that can bridge the gap between the crypto world and fiat banks, but that could change if the US decides to go after tokens as many other nations have done.