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This is an excerpt from The Breakdown newspaper. To read the full article, register.
“I don’t see it as a bad thing, this process they call ‘dollarization’… Thank God it exists.”
— Nicolas Maduro
The New York Times in the near future report that Venezuela became “the first country to manage a large part of its economy in crypto.”
Not by choice, though.
About half of Venezuela’s income comes from oil sales made in dollars, which Venezuela, being a sovereign state, cannot legally send or receive.
In the past, sovereign states sold their oil for dollars through a network of shell companies and offshore banks – or exchanged their oil for goods or infrastructure investment.
Now, they have a simple solution: Get paid in stablecoins. Economist Asdrúbal Oliveros comparison that Tether’s USDT stablecoin is the medium of exchange for nearly 80% of Venezuela’s oil trade.
The government banned trading in stablecoins, which it saw as a threat to the bolivar. But the crippling US sanctions left Venezuela with no choice but to embrace it.
Delcy Rodriguez, now Venezuela’s interim president, recognized the inevitability of crypto-enabled dollarization last August, he said business people whose “non-traditional management methods” were being put in place to manage the bolivar currency.
“Venezuelan’s government since June has allowed the use of more USDT,” Reuters report soon. With the government’s approval, banks are now selling the USDT they earn from oil sales to local businesses, who use it to pay both domestic and foreign suppliers.
He wants stablecoins to circulate in the retail market: The head of the National Association of Supermarkets in the country recently. he said government television that grocery stores were working to implement systems that accept payment in USDT.
In other words, the Venezuelan government is promoting the use of Tether-issued dollars instead of self-issued bolivars.
As a result, USDT – or “Binance dollars” as many Venezuelans call them – now work “Everything from food and condo fees to salaries and vendor fees.”
So for a stablecoin enthusiast like me, it was disappointing to see that neither crypto nor stablecoins were deemed worthy of listing in the US government. a case and Nicolas Maduro.
Instead, prosecutors described illegal money flowing in the old fashioned way: planes returning from Mexico “laden with narcotics,” explosives and detonators being sold for cocaine, security services paid for with a portion of the cocaine transported, and a $2.5 million bribe paid in cash.
Why not mention crypto?
There are two possibilities: 1) The US government does not say anything about crypto, so the prosecutors knew that they would stop this, or 2) crypto and stablecoins cannot move money in the size that Maduro and his friends need to move.
The first is the most interesting explanation, but the latter is more complicated.
Asdrúbal Oliveros explains: “The government is trying to eliminate (crypto) assets quickly,” explains Asdrúbal Oliveros, “because moving cryptocurrencies requires going through different channels that are not being implemented.”
A report from TRM Labs to a similar conclusion: “Large trading organizations continue to rely heavily on physical money, trading, and government or quasi-government security to move forward, while crypto often plays a secondary or supporting role rather than replacing these methods.”
National security researchers at Laws accept it: “Cryptocurrency evasion penalties are only marginal compared to traditional financial methods.”
Some are more excited about the use of stablecoins and crypto in, um, “global payments.”
InSight CrimeFor example, reports that the Mexican drug industry is being “supported” by a “pipeline of crypto drug companies that move dirty money through digital networks to Chinese drug dealers.”
As he explains in detail, stablecoins have found a middle ground between Chinese money traders who need dollars to sell to clients who evade Chinese capital controls and Mexican cartels who need to buy the drugs they mix into fentanyl from China.
It’s not the market-driven trend we crypto enthusiasts expect, but the revealed interest shows it’s strong. for example, DEA. he says Its illegal money laundering is on the decline because gangs are “prioritizing cryptocurrencies over traditional money laundering methods.”
The seizure of “real money” is very high: From 2020 to 2024, the DEA has confiscated $ 2.5 billion of crypto against only $ 2.2 billion.
This may explain why Maduro and his colleagues have stuck to traditional payment methods – digital cryptocoins and hard stablecoins are not ready to accommodate large-scale spending needs.
However, Venezuela’s embrace of digital dollars is starting a new trend: “U.S. enemies have established proof of effectiveness,” Laws he concludes, “and the technologies that are coming soon will strengthen it as well.”
If so, it could strengthen the dollar, too.
The dollar ban didn’t make Venezuela accept, say, the yuan for its oil – it just made the government use digital dollars instead.
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