Sanctions are stablecoins’ proof of concept 

The New York Times recently reported that Venezuela had become “the first nation to manage a large share of its finances in crypto.” 

Not by choice, though. 

Roughly half of Venezuela’s revenue comes from oil sales denominated in dollars, which Venezuela, being a sanctioned country, cannot legally send or receive. 

Previously, sanctioned governments would sell their oil for dollars through a web of shell companies and offshore banks — or barter their oil in return for goods or infrastructure investments.

Now, they have an easier option: Accept payment in stablecoins. Economist Asdrúbal Oliveros estimates that Tether’s USDT stablecoin is the means of exchange for roughly 80% of Venezuela's oil sales.

The government once banned transacting in stablecoins, which it viewed as a threat to the bolivar. But the crippling effects of US sanctions left Venezuela little choice but to embrace them.

Delcy Rodríguez, now the interim president of Venezuela, recognized the inevitability of crypto-enabled dollarization last August, when she told businesspeople that "non-traditional mechanisms of management” were being implemented to better manage the bolivar exchange rate.

“The Venezuelan government has since June allowed the use of more USDT,” Reuters reported shortly thereafter. With state approval, banks now sell the USDT earned from oil sales to local businesses, which use them to pay both domestic and international suppliers.

They want stablecoins to circulate at the retail level, too: The head of the country’s National Association of Supermarkets recently told state television that grocery stores were working to implement systems to accept payment in USDT.

In other words, the Venezuelan government is encouraging the use of dollars issued by Tether in place of the bolivars it issues itself.

As a result, USDT — or “Binance dollars” as many Venezuelans refer to them — is now used “for everything from groceries and condo fees to salaries and vendor payments.”

So for a stablecoin enthusiast like myself, it was disappointing to see that neither crypto nor stablecoins were deemed worthy of a mention in the US government’s indictment of Nicolás Maduro. 

Instead, prosecutors described illicit money moving the old-fashioned way: planes returning from Mexico “loaded with drug proceeds,” weapons like grenades and grenade launchers being bartered for cocaine, protection services paid for by a portion of the cocaine being transported, and a $2.5 million bribe paid in cash dollars.

Why no mention of crypto?  

There are two possibilities: 1) The US government no longer says anything mean about crypto, so the prosecutors knew to judiciously leave it out, or 2) crypto and stablecoins aren’t quite capable of moving money in the size Maduro and his associates needed to move it.

The former is the more fun explanation, but the latter is the more likely one. 

“The state is struggling to liquidate these [crypto] assets expeditiously,” Asdrúbal Oliveros explains, “because moving crypto funds requires passing various controls that are not being met.”

A report from TRM Labs reaches a similar conclusion: “Large-scale trafficking organizations continue to rely heavily on physical cash, trade-based laundering, and state or quasi-state protection for moving core proceeds, with crypto generally playing a secondary or complementary role rather than replacing these mechanisms.”

The national security analysts at Lawfare agree: “Cryptocurrency-based sanctions evasion still represents only a drop in the bucket compared to traditional illicit financial pathways.”

Others are more upbeat about the utility of stablecoins and crypto in, um, “international payments.”

InSight Crime, for example, reports that Mexican drug cartels are being “sustained” by an “industrial-scale crypto laundering pipeline moving dirty cash through digital networks to Chinese chemical suppliers.”

As they detail, stablecoins have found a niche matchmaking between Chinese money brokers who need dollars to sell to clients evading China's capital controls and Mexican cartels who need to buy the chemicals they mix into fentanyl from China.

It’s not the product-market fit we crypto enthusiasts have hoped for, but revealed preferences suggest it’s a powerful one. The DEA, for example, says its seizures of illicit cash are sharply lower because criminal groups are “prioritizing crypto over traditional cash-based laundering schemes.”

Seizures of “virtual currency” are correspondingly higher: From 2020 to 2024, the DEA has seized $2.5 billion of crypto vs. just $2.2 billion of cash.

That might explain why Maduro and his associates have stuck to more traditional means of payment — traceable crypto and freezable stablecoins aren’t quite ready for the largest money-laundering needs.

Nevertheless, Venezuela’s embrace of digital dollars is breaking new ground: “US adversaries have established an operational proof of concept,” Lawfare concludes, “and emerging financial technologies will likely further solidify it.”

If so, it might further solidify the dollar, too.

Being banned from using dollars didn't make Venezuela accept, say, yuan for its oil — it just made the government use digital dollars instead.

— Byron Gilliam

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