The Venezuelan government banned Binance after banning other platforms like Reddit, Signal, and X.
- The country tried to use USDT to curb U.S. sanctions, but Tether ultimately froze 41 of their suspected wallets.
- Venezuela launched its own crypto, Petro, but it was plagued by problems, including an unclear whitepaper, questionable funding, and even a corruption scandal.
- Remittances in crypto accounted for $461 million in 2023 alone.
Venezuelans have lost access to a vital peer-to-peer (P2P) market after the state-owned ISP, CANTV, blocked access to Binance. Despite the block, Binance assured Venezuelans’ funds are safe, and their team is monitoring the situation.
Cryptocurrency, mostly stablecoins, has been integral to Venezuelans to receive remittance and fight hyperinflation, which was 193% in 2023.
According to a Bloomberg report, the Venezuelan government uses crypto to circumvent U.S. sanctions on gold and oil imposed on May 31.
Venezuela previously attempted to launch its state-issued cryptocurrency, the Petro, but it ultimately failed. In November 2020, the Venezuelan Army inaugurated a crypto mining center in Caracas, highlighting government involvement in state-controlled mining. However, by May 2024, officials banned crypto mining due to its strain on the country’s power grid.
Using Cryptocurrency to Curb Restrictions
In 2023, Venezuela began shifting its oil sales to USDT, allowing it to trade in U.S. dollars without physically holding the currency. Initially, USDT was required as prepayment for half of each oil cargo’s value.
Venezuelan Oil Minister Pedro Tellechea told Reuters that they use various currencies depending on what each contract stipulates.
In response, Tether swiftly froze 41 wallets suspected of using USDT to evade sanctions on Venezuelan oil exports, per CoinDesk.
Problems with Venezuela’s Petro
The Petro’s launch was fraught with issues, starting with its whitepaper, which underwent several revisions. Initially, it was supposed to be based on Ethereum but later switched to NEM. Additionally, Ethereum developer Joey Zhou pointed out that parts of the whitepaper were plagiarized from Dash’s GitHub repository.
The Petro launch was plagued by issues, including conflicting information in different language versions of the whitepaper — one mentioned Ethereum, while another cited NEM. This confusion led to other projects falsely claiming to be the official Petro, causing one to surge by 100%.
President Maduro claimed they raised $750 million, per CNBC, but users reported different figures. During the ICO, Petros could only be purchased with Russian rubles, Bitcoin, NEM, or Ethereum, per Time, excluding the Venezuelan bolívar, which limited local access.
The government attempted to tie Petro to various uses, like passport fees and social housing funding, but its oil backing was never clearly explained. A corruption scandal involving the state-owned oil firm PDVSA led to the suspension of Petro operations, per Forbes.
The project was officially closed in January 2024.
Venezuelan Adoption of Crypto
In 2023, cryptocurrency accounted for $461 million, or 9%, of the $5.4 billion in remittances sent to Venezuela. According to Chainalysis, 92.5% of crypto transactions in Venezuela through mid-2023 occurred on centralized exchanges, with stablecoins dominating these transactions.
Many Venezuelans have turned to crypto as a way to fight hyperinflation and protect their assets, even with the use of just stablecoins.
During the 2018 rollout of the Petro, licenses were granted to 16 cryptocurrency exchanges, but Binance was notably absent from the list.
In April 2020, Binance launched its P2P crypto trading platform in Venezuela, targeting its growing market. At the time, over 500 BTC, equivalent to around $30 million, was moved weekly on the P2P platform LocalBitcoins, per Decrypt.
Removing Binance is a significant setback for Venezuela’s local P2P crypto market. It’s unclear whether the government will extend its censorship to other key P2P crypto platforms.
