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Venezuelan currency exchanges switch to crypto when dollars are scarce

A dozen sources claim that Venezuela's government has begun to allow the private sector to use dollar-linked cryptocurrencies for currency exchanges, due to the US restrictions on oil exports.

The sanctions imposed by the United States on Venezuela, which are described by the Venezuelan government as an "economic war", prevent many transactions. Companies that want to purchase raw materials abroad are forced to exchange their local bolivars into dollars, generated from the oil trade, foreign card transactions, and the central bank injecting them into the exchanges.

Oil revenue has dropped in recent months.

The United States Treasury Department issued Chevron last month a restricted license allowing the company to export oil again after a three-month hiatus. However, this license prevents any payments to be made to the government and reduces the amount of dollars that can be exchanged.

According to sources in the financial and private sector who requested anonymity for fear of repercussions, Venezuelan authorities have allowed more USDT (a digital currency known as Tether), whose value was pegged to U.S. dollars and is designed to maintain stability.

Digital currencies are a great way to keep the economy running during sanctions. This includes the production of food and other basic products.

Cryptography is used by some businesses to open up new operations when one closes.

According to another source, the use of cryptocurrency will increase. Sources told us last year that the state-owned oil company PDVSA gradually increased its digital currency use and moved sales to USDT since last year.

Tether has not responded to a comment request, but stated last year that it respects U.S. Treasury’s list of sanctioned organizations.

The Ministry of Communications and the Central Bank did not respond to any questions. However, Vice President Delcy Rodriguez stated during a meeting in August with businesspeople that "nontraditional mechanisms of exchange market management" were being implemented. She gave no further details.

Sources said that a small number of banks are selling the cryptocurrency, USDT in most cases, to certain businesses for bolivars. Businesses must use a digital wallet that has been approved by authorities to receive the value.

The crypto can be used to pay for domestic or international services or sold by businesses.

Ecoanalitica, a local analyst firm, estimates that $119,000,000 in cryptocurrency was sold to the private sector during July.

According to private and financial sector estimates, the Venezuelan central banks has injected $2 billion in the currency exchange market during the first seven months this year, which is 14% less compared to the same period of last year.

Analysts estimate that the restrictions on Chevron's license could further reduce the availability foreign currency. According to data from vessel tracking and company documents, oil exports fell by about 10% in July compared to the previous month.

"The exchange rate is always limited," said Orlando Camacho. He is a close friend of the ruling party, and also the head of an association for medium-sized businesses. "The companies' role is to also guarantee foreign exchange by their exports." Rod Nickel is responsible for the reporting and editing.

(source: Reuters)