Venezuelan Government Uses Petro Cryptocurrency to Evade International Sanctions, Warn Activists

• Venezuelan political critics and activists have warned that President Nicolás Maduro and his government are increasingly turning to cryptocurrency transactions as a method to evade international sanctions.
• This follows the U.S. reinstating gold and oil sanctions recently, following Maduro’s failure to honor an agreement to ensure fair elections scheduled for July.
• Andrew Fierman, head of national security intelligence at Chainalysis Inc., suggests that sanctioned regimes like Maduro’s often explore multiple avenues to evade such restrictions.

Venezuelan critics sound the alarm on Maduro regime’s use of cryptocurrencies to bypass international sanctions, urging for more stringent measures.

Critics Urge for Stricter Sanctions

For nearly two decades, the U.S. has imposed targeted sanctions on Venezuela, aiming to pressure the government into democratic reforms. However, national security analysts indicate that the Maduro regime continues to find ways to circumvent these restrictions.

A recent statement from the U.S. Department of State highlighted that General License 44—permitting transactions related to the oil and gas sector with Venezuela—won’t be renewed due to the Maduro administration’s non-compliance with electoral agreements.

Sanction Evasion Through Cryptocurrency

Fierman pointed out that regimes under sanctions typically explore various methods to bypass restrictions. The Venezuelan government, under Maduro’s leadership, has resorted to diverse strategies over the years, including leveraging the burgeoning cryptocurrency landscape.

A detailed report from the Woodrow Wilson International Center for Scholars co-authored by Venezuelan dissident Leopoldo López and Chainalysis’s director of Intel Solutions, Kristofer Doucette, underscores the loopholes in the recent sanctions. It draws attention to Maduro’s explicit pursuit of cryptocurrency projects to skirt these international restraints.

Chainalysis Uncovers $70 Million in Stablecoin Transfers

Furthermore, blockchain analysis by Chainalysis revealed significant financial maneuvers by Venezuela’s National Superintendency of Crypto Assets and Related Activities (SUNACRIP). They uncovered transfers amounting to over $70 million in stablecoins through accounts likely operated by SUNACRIP or its affiliates.

This discovery aligns with the broader narrative of the Maduro regime exploiting cryptocurrencies to maintain financial flexibility despite widespread sanctions. The 2018 launch of the Petro cryptocurrency, backed by Venezuela’s oil and mineral reserves, marked an initial effort to counter hyperinflation and navigate around sanctions, although it saw limited success.

Implications and Future Actions

Analysts like López and Doucette stress the economic harm inflicted on Venezuelan citizens due to these cryptocurrency manipulations. They assert that the billions misdirected through these means could have significantly contributed to revitalizing Venezuela’s struggling economy.

By advocating for more comprehensive and stringent sanctions from the U.S. and the European Union, the report calls on other nations to scrutinize the Maduro regime’s cryptocurrency activities aimed at evading international sanctions. The clampdown on Venezuelan cryptocurrency usage is seen as essential to curbing these financial evasions and ensuring sanctions maintain their intended pressure.

Conclusion

As Venezuelan leaders turn increasingly to cryptocurrencies to sidestep international sanctions, financial experts call for tighter controls and more robust sanctions. The key takeaway for policymakers and regulators is the need for vigilant oversight and adaptive strategies to address the evolving financial landscape driven by cryptocurrencies. The international community must respond with precision to counter these circumvention tactics effectively.