By the end of the first quarter of 2024, Venezuela’s state-run oil company, Petroleos de Venezuela SA (PDVSA), had adopted a new contract model requiring 50% of the value of each shipment in spot crude oil transactions to be paid upfront in Tether (USDT).

Brief Overview:

• Venezuela’s state-owned oil company has stepped up its pace of Tether (USDT) payments in the face of intensified U.S. sanctions.

• By the end of the first quarter of 2024, PDVSA adopted a contract model requiring 50% upfront payment in USDT.

• PDVSA now requires new customers participating in oil trading to hold cryptocurrencies.

Venezuela’s state-owned oil company PDVSA has taken steps aimed at increasing the use of digital currencies and stablecoins such as Tether (USDT) in its crude oil and fuel exports, according to a new report, amid tightening U.S. sanctions on Venezuela.

PDVSA Considers Using Tether (USDT)

Last week, the U.S. Treasury Department issued a directive to customers and suppliers of Venezuela's state-owned oil company PDVSA, asking them to reduce transactions by May 31. This measure will make it more challenging for Venezuela to increase oil production and exports, as all companies must obtain individual authorization from the United States before trading oil with Venezuela.

Since last year, PDVSA has been gradually shifting its oil sales to Tether’s dollar-pegged stablecoin, USDT, which has its value pegged to the U.S. dollar, ensuring its stability.

The shift is accelerating as oil sanctions are reimposed and is aimed at reducing the risk of sales proceeds being seized in foreign bank accounts as a result of those sanctions, according to people familiar with the matter.

PDVSA’s shift toward digital currencies is accelerating as oil sanctions are reimposed, according to people familiar with the matter, a move aimed at reducing the risk of sales proceeds being frozen in foreign bank accounts due to sanctions.

Last week, Venezuelan Oil Minister Pedro Tellechea told Reuters that they were considering using digital currencies as a preferred payment method for some oil contracts.

According to Pedro Tellechea: “We have different payment options in different currencies, depending on what is stipulated in the contract.”

The U.S. dollar remains the dominant currency in global oil market transactions, and while cryptocurrency payments are emerging in some countries, they remain relatively uncommon.

Last year, PDVSA faced a corruption scandal that revealed about $21 billion in unexplained oil export receivables in recent years, partly related to past transactions involving various cryptocurrencies.

Last year, PDVSA was hit by a corruption scandal that revealed about $21 billion in unidentified receivables from oil exports in recent years, some of which were related to previous transactions involving various cryptocurrencies.

Under Tellechea, who took over the country's oil ministry in the wake of the scandal, Venezuela's oil exports have surged, with exports soaring to about 900,000 barrels a day in March, the highest in four years, driven by U.S. license sales.

PDVSA requires 50% payment in USDT

By the end of the first quarter of 2024, PDVSA will transition a large number of spot oil transactions (excluding swaps) to a contractual framework requiring upfront payment of 50% of the value of each shipment in USDT.

In addition, PDVSA requires any new customer who wants to participate in oil trading to hold cryptocurrency stored in a digital wallet. According to a source, PDVSA not only implemented the requirement to hold cryptocurrency for new customers, but also applied this requirement to some existing contracts, even if these contracts did not explicitly stipulate the use of USDT for transactions when they were signed.

One trader said: "According to PDVSA's requirements, Tether (USDT) transactions usually cannot pass the review of the transaction compliance department, so the only solution is to cooperate with intermediaries to conduct transactions." #PDVSA #Tether