White House

Trump to target Venezuelan ‘bitcoin’ as U.S. tightens pressure on Maduro government

People take part in a protest demanding the government attend to the country's health crisis, in Caracas, Venezuela, Thursday, Feb. 8, 2018. Shortages of medicine, medical supplies and services are causing avoidable deaths in the South American country.
People take part in a protest demanding the government attend to the country's health crisis, in Caracas, Venezuela, Thursday, Feb. 8, 2018. Shortages of medicine, medical supplies and services are causing avoidable deaths in the South American country. AP

President Donald Trump will take further aim at the Venezuelan government and restrict U.S. financial transactions involving Venezuela’s new digital currency, according to two U.S. sources familiar with administration plans.

The new sanctions, which will be imposed as early as Monday after Trump signs the executive order, are likely to be part of a larger package of measures that also include several individual sanctions against Venezuelan officials and/or associates.

President Nicolás Maduro launched the government’s own version of a bitcoin last month in order to boost capital and circumvent U.S. sanctions. The government claims the so-called Petro is backed by Venezuela’s crude oil reserves, but skeptics say the government contract doesn’t explicitly back the claim.

“They’re setting up a stand on the front porch of Venezuela to sell snake oil that’s essentially backed by nothing,” said Russ Dallen, a managing partner at the investment bank Caracas Capital Markets, which tracks Venezuelan oil shipments and advises U.S. officials on Venezuelan matters. “People believe its backed by oil, but if you read the contract, it’s really not.”

Venezuela sits on the world's largest oil reserves, but the once mighty nation has plummeted into a deepening economic crisis amid rising inflation.

Maduro sees the so-called Petro as a means to pull his beleaguered nation out from the crumbling weight of a deepening economic and humanitarian crisis.

“Venezuela is at the vanguard of cryptocurrencies, at the vanguard of technology and the economy,” Maduro said last month announcing “pre-sales” of the currency.

The Trump administration has been turning up the pressure on Caracas since Maduro engineered a vote for a new constituent assembly that stripped democratically elected lawmakers of their power.

The United States has slapped sanctions against more than 20 current and former Venezuelan government officials in recent months, including on Maduro. The White House has prohibited U.S. banks from purchasing new Venezuelan debt, a deep blow to the country’s finances.

While Venezuela’s was the first country to launch its own cryptocurrency, many governments have been looking into electronic currencies. Russian government officials have considered issuing some sort of crypto ruble to evade international sanctions.

The Treasury Department didn’t immediately respond to questions about the anticipated sanctions.

U.S. lawmakers have been raising concerns for months that the cryptocurrency could provide foreign governments a mechanism to make payments to foreign lenders and bondholders in the United States and thwart the intent of U.S.-imposed sanctions.

U.S. Sen. Bill Nelson, D-Fl., raised concerns earlier this week with the Treasury Department that Maduro was using a “rogue crypto currency” to flaunt U.S. sanctions.

“What is the Department of the Treasury’s Office of Foreign Assets Control (OFAC) doing to prevent Maduro and other sanctioned entities from avoiding or undermining U.S. sanctions by using or creating cryptocurrencies?” Nelson asked in a letter to Treasury Secretary Steven Mnuchin.

Sens. Marco Rubio, R-Fl., and Robert Menendez, D-N.J., raised concerns even earlier in January in noting that the mechanisms could be used by other U.S. adversaries.

“To what extent is the Department monitoring possible nefarious uses of other cryptocurrencies by Venezuela, Russia, and North Korea?” they wrote.

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