Last week, President Donald Trump issued an Executive Order banning “all transactions” and “dealings” by any individual or entity in the United States that involve “any digital currency, digital coin, or digital token” issued by Venezuela. This Executive Order was instituted just under a month after President Nicholas Maduro launched the pre-sale of “petro,” a cryptocurrency backed by the Venezuelan government’s crude oil reserves. Since its inception, the petro has been met with deep skepticism by both the market and the Venezuelan legislature, but President Maduro—through petro’s official website—claims it has raised over $735 million in its pre-sale. The opposition in the Venezuelan legislature has denounced petro as an illegal issuance of debt.
We previously have blogged about alleged money-laundering violations by Venezuelan oilmen and OFAC’s designation of the Vice President of Venezuela as a Specially Designated Narcotics Trafficker. This is only the most recent in a long line of sanctions targeting the Venezuelan government and its state-controlled oil industry.
On the back of this new Executive Order, the Office of Foreign Assets Control (“OFAC”) has issued new FAQs relating to virtual currency, both to regulate the petro and assert its power in the virtual currency space. As one might suspect, OFAC has decided to treat virtual currency in the same way it treats fiat currency and other property: if the individual is on Specially Designated Nationals (“SDN”) list, transactions are barred no matter what form of currency is used. If a United States citizen or entity is involved, or is otherwise subject to United States jurisdiction, they “are responsible for ensuring that they do not engage in unauthorized transactions prohibited by OFAC sanctions.” The OFAC FAQs specifically request “technology companies; administrators, exchangers, and users of digital currencies; and other payment processors” to develop compliance plans. Obviously, these compliance plans would have to take into account blockchain and virtual currency technology that is constantly evolving.