Venezuela Wants To Use Bitcoins For Oil Transactions
According to Bloomberg, the Central Bank of Venezuela is examining whether it can receive and transfer cryptocurrencies.
The bank's investigation follows the news of state-run Petroleos de Venezuela SA (PSDV), which has been running tests to eventually transfer Bitcoin and Etherum to the central bank and have it pay its suppliers with digital currency, according to four people with direct knowledge.
Sources said the central bank has been studying plans that would allow cryptocurrencies to be recorded as international reserves, now near-record-low levels.
Dwindling reserves come as US sanctions tighten the financial noose around President Nicolas Maduro.
Economic sanctions have taken Venezuela off the global financial system, inducing one of the worst financial crashes in modern time.
New rounds of sanctions by the US Department of the Treasury targeted 4 four entities and four vessels earlier this week for transporting Venezuelan crude to Cuba.
Since the US imposed sanctions on PSDV, President Maduro tried to launch Petro, a cryptocurrency issued by the government of Venezuela and backed by the country's oil and mineral reserves. Efforts to launch the coin have widely failed in the last several years.
The chart below shows the moment when President Maduro tried to launch the coin on the backdrop of declining foreign-currency reserves, nearly halving since 2015.
It's not entirely understood how PSDV acquired Bitcoin, Ethereum, and or other digital assets, or the total value of its holdings, but certainly, it's enough that the oil company wants to use it for significant commodity transactions.
In August, PSDV received an oil payment in Chinese yuan after its customer had trouble finding a credible financial institution to facilitate a transaction.
Sources told Bloomberg since PDVSA is heavily sanctioned by the US, it would rather have the central bank store the digital assets and pay its suppliers with the crypto when needed.
"PDVSA may be hesitant to sell its cryptocurrencies on the open market because it would require the company to register with an exchange and subject itself to due diligence. Instead, it wants the central bank, which officials at the oil company believe is less exposed to potential blocks, to use the crypto to pay entities PDVSA owes money to."
Bitcoin was walloped again on Thursday as a bear market unfolded in the last 50 hours of trading.
And since the US has cut Venezuela from the global banking system and sanctioned its economy into collapse, Maduro might have no other choice than gravitate not just to cryptos for oil transactions but adopt the System for Transfer of Financial Messages, an alternative payment system to SWIFT, that is managed by the Russians.
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