Tether in Focus as 80% Venezuela Oil Revenue Moves via Stablecoins

Nicolás Maduro’s arrest in the United States has pushed Tether back into focus. USDT has shaped Venezuela’s oil trade under sanctions. It has also become a core payment tool for citizens dealing with currency collapse.

Stablecoin USDT Stays Key as Maduro Case Draws Scrutiny

Tether’s stablecoin has been used for two purposes within Venezuela according to a WSJ report. It has enabled the state oil industry to get around banking restrictions. It has also provided Venezuelans with a dollar-indexed alternative as the value of the bolivar dropped.

Maduro is being held in a Brooklyn jail, heightening scrutiny of financial activity linked to his regime. But analysts say this will not be enough to take USDT out of Venezuela. They say that high inflation and weak institutions continue to undergird a solid demand for stablecoins.

Adam Zarazinski, CEO of crypto-intelligence firm Inca Digital, said crypto use in Venezuela will likely continue. Stablecoins serve as a hedge for daily users, he said. It also warned that those same conditions allow for sanctions evasion.

Maduro entered a plea of not guilty to narcotrafficking charges at his indictment in U.S. federal court. His case has raised interest in monitoring funds associated with Venezuelan state activity. 

The U.S sanctions redefined the manner in which Venezuela conducts its oil exportation. In 2020, Petroleos de Venezuela (PdVSA) started accepting USDT as oil payments. Settlement were sent directly to direct wallet addresses or via a third-party who swapped the proceeds into Tether.

USDT Powers 80% of Venezuela Oil Revenue

This transition transformed the oil economy structure. According to local economist Asdrúbal Oliveros in a podcast, nearly 80% of the revenue of the Venezuelan oil sector is collected in stablecoins such as USDT. The estimate underlines the extent to which state cash flow was penetrated by stablecoins.

Since then, Tether collaborated with the U.S. authorities to freeze wallets associated with the Venezuelan oil trade. It is under U.S. and international sanctions followed by the company. It also claimed that it actively contributes to law enforcement activities against illegal activity.

Growth of the stablecoin is not bound to oil trade only. USDT is now a viable alternative currency among Venezuela locals. It has been used by users to make cross-border payments, their day to day purchases.

Tether CEO Paolo Ardoino cited long-term currency collapse as seen in various countries. He claimed that in the 10 years the bolivar depreciated against the U.S. dollar, it lost 99.8% of its value. He applied the trend to understand why the adoption of USDT increased.

Researchers attribute the reliance on stablecoins to lack of trust on domestic banks. Capital controls, which limit availability of physical U.S. dollars, are also mentioned. In 2018 Venezuela launched an oil-backed Petro token that was a failure. It failed because of lack of popular confidence and international recognition.

Ari Redbard, TRM Labs policy global head, commented that the second major problem is the dual-nature of stablecoins. He claimed they may be used as a civilian lifeline and at the same time facilitate the elusion of sanctions.