Tether, the company behind the stablecoin USDT, has announced that it will freeze addresses associated with sanctioned entities to comply with regulations. This decision comes after a report by Reuters revealed that Venezuela’s state-run oil company, PDVSA, was using cryptocurrencies, including USDT, to bypass sanctions imposed by the United States. The US Treasury Department has instructed PDVSA’s customers and providers to wind down transactions by May 31 due to Venezuela’s failure to implement electoral reforms. The reimposed sanctions will make it difficult for Venezuela to increase its oil production and exports as companies will need US authorizations to do business with the country.
According to anonymous sources cited in the Reuters report, PDVSA has turned to USDT as a way to avoid having its funds frozen in foreign bank accounts. This move is seen as a response to the new sanctions. The sources claim that PDVSA has shifted its oil sales to USDT and has restructured its spot oil deals to require prepayment in the stablecoin. The Venezuelan oil company now requires new customers to hold cryptocurrency in a digital wallet for oil transactions.
This is not the first time that cryptocurrency payments have been linked to PDVSA. In 2023, reports emerged regarding a corruption scandal involving $21 billion of unaccounted receivables for oil exports. The use of cryptocurrencies has raised concerns about money laundering and illicit activities in the oil industry. Despite these concerns, it is unclear how effective the freezing of addresses linked to sanctioned entities will be in curbing PDVSA’s use of cryptocurrencies.
Tether has stated its commitment to complying with the Office of Foreign Assets Control’s (OFAC) sanctions list and freezing addresses associated with sanctioned entities promptly. By adopting this approach, Tether aims to prevent payments that violate US sanctions regulations. The effectiveness of these measures will likely depend on the ability to identify and track addresses associated with sanctioned entities.
The use of cryptocurrencies, particularly USDT, by PDVSA to bypass sanctions highlights the ongoing challenges related to financial regulations and the increasing role of digital assets in international transactions. It remains to be seen how regulators will address this issue and whether additional measures will be put in place to prevent the misuse of cryptocurrencies in the future.
Tether needs to implement stronger measures to ensure compliance with sanctions regulations.
The shift to prepayment in USDT for oil deals shows how crypto is becoming increasingly integrated into traditional industries.
The reimposed sanctions on Venezuela will undoubtedly have a significant impact on their oil production and exports.
The freezing of addresses might not be enough to stop PDVSA from using USDT for transactions.
By freezing addresses, Tether is actively working towards preventing payments that violate US sanctions regulations.