Venezuela chose USDT to bypass US sanctions.

Venezuela's state-run oil company PDVSA is turning to cryptocurrency, specifically Tether (USDT), to avoid renewed U.S. sanctions.

This strategic change is aimed at protecting the country's oil sales revenue from being blocked in foreign bank accounts. The urgency will intensify as the US Treasury Department tightens its grip on the oil-rich nation over election reform demands.

Venezuela's conversion to USDT may be challenged.

Reuters reports that the US Treasury has announced that it will not renew PDVSA's general license. Additionally, the US Treasury has set a May 31 deadline for PDVSA to complete its work.

The decision is part of a broader effort by Washington to pressure Venezuela to make political changes, complicating Venezuela's efforts to boost oil production and exports. With traditional banking avenues closed, PDVSA's move to USDT reflects a trend toward integrating cryptocurrency into global oil trading, albeit early.

“We have different currencies as specified in the contracts,” said Venezuela's oil minister, Pedro Telchea.

Read more: 9 Best Crypto Wallets to Store Tether (USDT)

Telechea's comments highlight the flexibility with which PDVSA is integrating its payment systems. The global oil market is mainly traded in dollars, which makes the transition to cryptocurrency a significant difference.

PDVSA's gradual shift to cryptocurrency began last year, but peaked following the reimposition of US sanctions. Therefore, at the end of the first quarter, PDVSA moved many of its oil contracts to a model that required prepayment of the cargo by half a dollar in USDT.

In addition, the company requires new customers participating in oil transactions to hold cryptocurrency. PDVSA is also re-applying this requirement to some existing contracts.

However, this change has its own problems. The use of USDT for large transactions such as oil sales is still rare and meets with uncertainty in business sectors.

“The USDT transactions, as PDVSA requires them to be, do not go through any merchant fulfillment department, so the only way to make it work is to work with an intermediary,” an oil trader said.

While necessary to meet digital marketing requirements, this reliance on intermediaries may result in a small portion of oil revenues reaching PDVSA's accounts.

The effectiveness and safety of using currencies like USDT to reverse sanctions is under investigation.

Tether has been proactive in freezing accounts related to OFAC violations, demonstrating a compliance stance consistent with US regulations. Additionally, tracking blockchain transactions adds another layer of complexity, potentially exposing illegal activities.

Read more: 8 best on-chain analytics tools in 2024

Guillermo Fernandez, the founder of the Blockchain firm, expressed his doubts about the immediate adoption of cryptocurrency for such purposes.

“While I understand that crypto offers many benefits to the international oil trade, it is difficult to ensure that Venezuela will switch to a crypto system without first establishing a local regulatory framework and a national reconciliation body, and without being able to print an effective balance sheet for national cash payments. Sales,” Fernandez told BeinCrypto.

However, Minister Telecha remains hopeful of easing sanctions on Venezuela and expanding its oil and gas projects.