President Donald J. Trump issued an Executive Order blocking U.S. persons from purchasing or otherwise dealing in cryptocurrency originating from or connected to the Government of Venezuela. This follows an earlier Executive Order from August 2017, which barred transactions involving new debt issued by the Government of Venezuela and its state-owned oil company, Petróleos de Venezuela, S.A. ("PdVSA"), and was coupled with new sanctions against four current and former Venezuelan government officials associated with President Nicolas Maduro.

The latest Executive Order states that the White House found evidence that President Maduro's regime was attempting to avoid U.S. sanctions by issuing the digital currency. The currency, which is referred to as the "petro," was released in February 2018 and accepted transactions in U.S. Dollars and Euros. According to reports, President Maduro claims to have already raised $5 billion in commitments to the petro since its issuance, the first-ever issuance of a digital currency by a sovereign government.

Based on the findings, the Executive Order prohibits:

  • all transactions involving any digital currency, digital coin or digital token issued in connection with the Government of Venezuela on or after January 8, 2018, by any U.S. person or person or entity within the U.S.;
  • any transaction that attempts to evade, avoid or violate any of the prohibitions set forth; and
  • any conspiracy formed for the purpose of violating any of the prohibitions.

Separately, the Office of Foreign Assets Control ("OFAC") issued new Digital Currency-related FAQs, explaining that OFAC compliance obligations are the same, regardless of whether a transaction is denominated in digital currency or traditional fiat currency. These FAQs apply to all sanctions programs, not only the Venezuela-related sanctions, and highlight sanctions risks arising from digital currencies. Due to these risks, OFAC recommended that technology companies, administrators, exchangers, users of digital currencies, and other payment processors should develop tailored, risk-based OFAC compliance programs.

Commentary / Joseph V. Moreno

This ban is not surprising – earlier this year the Treasury Department issued a warning that purchasing the petro could lead to legal jeopardy for U.S. investors. Those who chose not to heed that warning should realize that the ban is effective retroactively to January, and applies not only to the petro but to any other bitcoin-like digital currency the Government of Venezuela may issue going forward. The petro was always a thinly-disguised effort by the Maduro administration to sidestep last year's ban on debt issuances and grow its reserve of foreign currency, and will further impact the ability of the Government of Venezuela to dig itself out of its current financial crisis. The remaining question is whether the next shoe to drop will be broader sanctions against the Venezuelan oil industry, a move reportedly under serious consideration by the Trump Administration.

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