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Ofac: Venezuela's crypto offering could be sanctions breach
Trade Journal
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The country's oil-backed petro is seen as an attempt to avoid the US payments system The Venezuelan government last week commenced the pre-sale of the petro (PTR) cryptocurrency, its supposedly oil-backed token that it hopes will open the doors to foreign financing amid tough economic sanctions from the US. The Office of Foreign Assets Control (Ofac), the US Treasury agency that administers and enforces economic trade sanctions, has warned investors that purchasing the coin could be a breach of the economic restrictions enforced on the country. Claims from President Nicolas Maduro suggested that initial demand has been strong, with over 17,000 orders in the pre-sale stage raising as much as $735 million. But subsequent reports – and data from the NEM blockchain on which the Petro is based - show otherwise. Confidence has not been much improved by Maduro’s hint at a second cryptocurrency, Petro Oro, which he suggests will be backed by gold. The fledgling currency faces a multitude of political, technical and theoretical problems before even factoring in the perilous situation that it is potentially defying US sanctions. Given that the original intention of the coin was to allow the country to access international financing despite the economic blockade put on it by the US, Treasury’s decision is potentially fatal. “Ofac has made it clear that it regards the purchase of petros by US persons as a prohibited extension of credit to the Venezuelan Government,” said Lee Buchheit, partner at Cleary Gottlieb. “It has warned that US persons dealing in petros ‘may be exposed to US sanctions risks’”. KEY TAKEAWAYS