Have Cryptocurrencies Really Helped Venezuela Sidestep US Sanctions?

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Venezuela is collecting airport taxes through an application that converts these funds into Bitcoin, demonstrating the country’s continuing use of cryptocurrencies to evade US sanctions.

Since February 2018, Venezuela’s Simón Bolívar International Airport outside the capital Caracas has required airlines to pay for operational services through an application called Jetman Pay, according to ABC International. This converts the airport taxes into Bitcoin, allowing them to be transferred to international exchange houses in Hong Kong, Russia, China and Hungary. There, they are converted into dollars and deposited into accounts held by the Venezuelan government.

In this way, the Venezuelan regime has been attempting to build up its foreign currency reserves in defiance of US sanctions.

SEE ALSO: Venezuela’s New Digital Currency: Economic Gamble or Criminal Scam?

Additionally, Jetman Pay is owned by BCDA Aeronautical Solutions, a Florida-based firm which collects two percent of all fees levied this way at the airport, according to service contracts seen by ABC. This means a US-based company may be helping Venezuela avoid sanctions.

This is not the only example of Venezuela turning to cryptocurrencies — digital currencies that are regulated through encryption techniques, independently of a central bank. In early 2018, President Nicolás Maduro launched an oil-backed digital currency known as the Petro. At the time, this was hailed by Venezuelan deputy Andrés Eloy Méndez as a key tool in evading the “financial and commercial blockade” imposed by the United States.

The US Treasury Department responded by banning US citizens from buying the Petro, describing the currency as “another attempt to prop up the Maduro regime, while further looting the resources of the Venezuelan people.”

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Although Maduro’s administration still sees cryptocurrencies as an expedient means to flout US sanctions, the continuing use of Bitcoin in Venezuela’s airport tax scheme suggests that international cryptocurrencies, such as  Bitcoin, are proving more useful than the Petro.

“Every currency depends on trust … Venezuela and its officials are not trustworthy, so anything they create can be manipulated afterwards,” Rodrigo Andragnes, executive director of the non-governmental organization Bitcoin Argentina, told BBC Mundo.

He points out that the Petro has already been manipulated. It was originally backed only by oil, but it is now more vaguely linked to all Venezuelan subsoil resources.

Another result of the Petro experiment is that it has likely helped Venezuela develop the knowledge and institutions necessary to exploit opportunities offered by other cryptocurrencies. Although it uses Bitcoin, the airport tax scheme is coordinated by the National Superintendency of Crypto Assets and Related Activities (Superintendencia Nacional de Criptoactivos y Actividades Conexas —Sunacrip), an agency created to manage Petro distribution.

SEE ALSO: Latin America Lacks Regional Strategy to Halt Bitcoin Money Laundering

Publicly, Maduro continues to proclaim confidence in the Petro. In July 2019, he ordered Venezuela’s Central Bank to accept transactions in the cryptocurrency, and also announced plans to distribute one million “Petro wallets” among Venezuelan citizens.

But these domestic uses are a far cry from the Petro’s original purpose as an international currency free from US controls. The Petro is not traded in international cryptocurrency exchange houses, a clear sign of its lack of global traction. For now, it seems to survive only because Venezuelans are obliged to pay taxes based on the rate of the Petro.

Even Russia, Venezuela’s major international ally, appears to have lost faith in the currency. After initial attempts to use the Petro for trade between the two countries, they are now switching back to the ruble. In March 2019, the US Treasury Department sanctioned the Russian bank Evrofinance Mosnarbank for its role in financing the Petro, the only time a foreign firm has been linked to the new cryptocurrency.

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