Venezuela: Tether For Oil?
Venezuela has the richest oil reserves in the world. Yes, larger than Russia or the Middle Eastern countries.
This is the top, and it's probably still very relevant, even if the data is from 2016:
But what are these reserves good for if they can't be exported due to renewed US sanctions? Geopolitics is a bitch. How else would a country that had an inflation rate of 190% last year (and a long period of hard times) be hit by another wave of sanctions, when the ones that hurt are the people, and rarely the politicians? Looks like those reserves shouldn't be touched, being so close to the US and all... They'd be better off controlled by a US company, sometime in the future... At which point, Venezuela will be an ally, of course...
But Venezuela or rather its long-lasting regime doesn't like that perspective. And since they can't sell their oil for US dollars (and probably not for Euros, either), their market has reduced significantly, mainly to the BRICS countries and applicants that aren't rich in oil and want to trade in something else than the US dollar. I don't think they have enough countries in this category. Certainly not enough to match their export potential.
So, then they started to explore alternative solutions. Cryptocurrency is already widely used in their country with such rampant inflation, but now they want to elevate it at the state level for oil exports. The thinking is: if they can't deal in US dollars, why not use stablecoins that are pegged to US dollars instead?
I would have no issue with this logic... if there wasn't a problem. Tether (USDT), same as USD Coin (USDC), became a sort of proxy for USD in the crypto world. I don't believe either Tether Corp or Circle and Coinbase have autonomy when it comes to the USD-based stablecoins they issue and maintain, especially on matters involving breaching of sanctions, funding of terrorism, or whatever other plausible pretexts can be found to fully control something.
Unlike algo stablecoins (which are too small to matter), USDT and USDC have USD deposits and other liquid USD-denominated investments that back the peg, and bank accounts that can be frozen, at which point, their peg would go nuts. So, they are at the mercy of the government, especially in a Wild West territory they operate in.
So, I don't think Venezuela will be able to use USDT or USDC to circumvent US sanctions unless the US closes its eyes to this. The question is, will they? Or will they show who truly controls USD-backed stablecoins in clear cases, not in general?
There is the possibility that the Venezuelan state oil company will be able to conduct these transactions in a way that raises no questions and without any red flags being hit, but when we talk about huge amounts of USDT, I wonder if they can hide this.
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https://havenprotocol.org could be a good option. Unfortunately HBD is too small in marketcap to be usable in these large oil trades. Optionally Venezuela could start accepting a blue chip cryptocurrency and have very good results during a bull market. Later they could exchange them for privacy coins or even use them to pay salaries for government employees etc. What the country need is a bold visionary leader. We have seen this happen in El Salvador and Argentina. We could wish for a 3rd. I don't follow geopolitics. I don't know if that would even be possible.
That may be a good option for them, but not sure if it is a good option for their business partners. They can easily be branded as breaching sanctions, if things are discovered in some way, unrelated to the Monero ecosystem.
Yeah, HBD is a good solution for people or small-to-medium businesses, but that's about it so far.
It's difficult to use volatile assets to pay salaries because at some point bear market comes. They seem more interested in a way to do inter-state commerce and leave regular people to manage how they can. In a way, it's ok that at least they let people use whatever means they can (including crypto), to make a living. Many dictators want absolute control, which doesn't seem to be the case.
The interesting fact is they may follow with interest what El Salvador, but especially Argentina are doing, being both in Latin America. Maybe this idea with USDT came as a result of seeing what the other countries that were in trouble on the continent were doing.
IIRC both Venezuela and Argentina are both resource rich countries that faced similar economic problems such as hyperinflation and while sharing a somewhat similar demographics. I wish the people of Venezuela will learn their lesson from other countries in the region and elect a Javier Milei.
Venezuela was more into cryptocurrency bigger and earlier than Argentina and El Salvador based on what I have seen. There is a good chance many of the citizens would welcome more cryptocurrency usage in the country. Dealing with sanctions on the other hand is beyond my expertise.
Hmm, I looked it up, and things are quite complicated over there politically, but maybe they'll have that chance, at some point.
Hello, @gadrian. This is a good article about Venezuela and the US sanctions that are on Venezuela. I think the US should stop the sanctions myself. Sanctions do hurt the innocent people involved. Have a great rest of the week. Barb 😊 !BBH !CTP #ctp
They usually do. Thanks for your comment, Barb.
You're welcome @gadrian and yes those darn sanctions are terribly cruel. !BBH !CTP
The USA sanctions of Venezuela actually seem unfair to me. The governments won’t even be the ones to suffer it but the innocent ones but why the sanction?
Isn't that usually the case? Politicians fight and then kiss and make up, while people suffer the consequences.
Hm I don't think a regime will wanna rely on crypto where it has no control over it, they rather trade with brics and allies
I'm sure they'd prefer BRICS countries, but most of them have rich oil reserves themselves, and the others probably prefer to deal in USD. Stablecoins could be an alternative to fiat USD which some countries might accept to deal in.
I think they would rather go another way with less risk of being flagged. Monero or Zcash then switch to a stable coin possibly. Those oil companies will do anything to get the price on that oil!
It is possible. But if this is discovered, Venezuela doesn't risk much, but the partners they trade with will be publicly ostracized as well (if they are not already).
From what I've read, Tether already blocked some USDT wallets that the Venezuelan government used. I guess to be safe from such controls, actual crypto or algo stablecoins are the only options.
Actual crypto they could probably use. Algo stable coins probably not, because there isn't any big enough atm. But as I mentioned in other replies, if these transactions are traced, it's probably not Venezuela that suffers this time, but the oil buyer, if they aren't already on some international black/gray list.
I guess I don't know the amount these usually reach. But with the sanctions and blocking of popular stablecoins, they might not have a choice but to try both crypto and algo stablecoins.
I checked it out to respond to another comment, and it looks like they have presidential elections in Venezuela this year. The question is if they'll have real elections or not. Dictators tend to love to remain in power. Probably as a result of these elections, we will see sanctions lifted or continued. If they continue, they will try to find different ways to avoid them, including stablecoins.
Well, they are inter-country contracts, and it's oil. They don't usually talk in small numbers.
I don't think it's a lasting option as they could get blocked. However, I wonder if they could break it up and mix up the crypto before using it to pay for transactions. I guess there is no way to directly ban them completely.
Yep, that would be some work, but I'm sure they could find a way to be less obvious. It would be a cat-and-mouse game, as their wallets are discovered. After all, don't drug lords launder money through banks or other legit businesses?
Blocking should not be done, in this way the problem should be resolved by talking to each other.
Sometimes when politicians from different camps talk to "each other" it's like talking to deaf ears. They each say their part and none of them listen to the other.
Yeah I totally agree with you.