Venezuela Evades U.S. Sanctions: Pays allied countries in Bitcoin
As reported by the local news outlet Runrun.es, the government of Venezuela is paying companies from allied countries, such as Iran or Turkey with Bitcoin to mitigate the effects of United States sanctions on its economy.
The economy of Venezuela has been in a state of total economic collapse. This has been largely due to the United States ramping up sanctions on Venezuela since 2017. These sanctions have worked to cripple Venezuela’s oil industry, blocked its access to international financial markets, and scared off potential investors under threat of financial punishment. It is estimated that the economic sanctions have cost Venezuela’s economy upwards of US $11 billion in 2019.
Faced with the troubling economic situation, the ruling government proposed the new anti-blockade law, arguing it is essential to helping circumvent the sanctions. The Venezuelan National Constituent Assembly (ANC) approved the anti-blockade bill in October 2020. Now with the bill passed, the government can use cryptocurrencies both public or private for internal and external trade purposes.
Among other provisions, the anti-blockade law also grants the government to authorize the creation and implementation of any financial mechanism, including the use of crypto assets and instruments based on blockchain technology.
Venezuela is not the only country attempting to use Bitcoin to evade sanctions. In Oct 2020, Iran also amended its legislation on digital assets to allow the central bank to buy bitcoin directly from miners operating in the country. Based on the new laws, cryptocurrencies legally mined in Iran will only be exchangeable when they are used to finance imports from other countries. Iran accounts for 2.67% of the Bitcoin hash rate (Source: Cambridge Bitcoin Electricity Consumption Index).
As of this writing, Venezuela accounts for 0.46% of the Bitcoin hash rate. However, the Venezuelan government is planning to increase its bitcoin mining capability with its dedicated cryptocurrency mining center launched in Nov 2020.
