"Private Dollar" under Sanctions: How USDT Became Venezuela's Economic Lifeline

The latest report from The Wall Street Journal reveals a stark reality: under the heavy pressure of US sanctions, USDT has evolved beyond a mere cryptocurrency into a key tool for Venezuela’s state oil company to circumvent sanctions, and it has become the last line of defense for ordinary citizens against currency collapse. From official oil trade to everyday street transactions, this former crypto experiment is transforming into a financial reality for the nation.

USDT’s Dual Identity in Venezuela

From Oil Trade to Daily Life

Venezuela’s state oil company (PdVSA) has adopted USDT as the settlement currency for oil transactions. According to reports, approximately 80% of oil revenues now flow through stablecoins like USDT, either directly into wallets or quickly exchanged via intermediaries, successfully bypassing layers of international financial sanctions.

More notably, USDT usage has penetrated into daily life in Venezuela. Amid hyperinflation nearing 10,000,000%, ordinary citizens have begun using USDT to pay rent, receive wages, buy daily necessities, and cover barber expenses. In many regions, USDT has effectively become a “people’s dollar,” providing an economic lifeline for those suffering from the collapse of their national currency.

Why USDT?

This is no coincidence. Between 2019 and 2020, US sanctions on Venezuela’s finance and oil sectors intensified, causing the traditional banking system to almost completely fail and cutting off many US dollar settlement channels. In this context, stablecoins were introduced into the energy trade chain as an alternative to bypass sanctioned banking systems.

For the people, the choice was even harsher. Over the past decade, if you stored your savings in bolivars, what you saw was not interest but the continuous erosion of wealth. To survive, locals had no choice but to turn to USDT pegged 1:1 to the US dollar.

Tether’s Regulatory Dilemma and Position

Official Response

Tether’s spokesperson issued a clear statement: the company complies with all applicable US and international sanctions regulations and works closely with authorities, including the US Office of Foreign Assets Control (OFAC). Tether also stated it will periodically assist law enforcement in freezing addresses related to illegal activities or sanctions violations upon legitimate requests.

This stance shows Tether attempting to find a balance amid a dilemma: on one hand acknowledging the reality, and on the other emphasizing its compliance position.

Risks Faced

From Wall Street’s perspective, Tether has long been viewed as a high-risk tool for sanctions evasion. The recent report suggests that US regulators may conduct more in-depth scrutiny of USDT’s use in Venezuela. Moving forward, Tether could face stricter regulatory requirements and may be forced to adopt more aggressive freezing measures in certain scenarios.

How Will It Evolve?

Analysts expect that even if Maduro is arrested, USDT’s use in Venezuela will not cease. This “people’s dollar” has become part of the local economic structure and is unlikely to be replaced in the short term.

However, this also means US regulatory authorities may intensify efforts to trace USDT’s funding chain. The game of cat and mouse involving sanctions, stablecoins, and financial innovation has just escalated. For Tether, balancing compliance with sanctions and maintaining business will be a long-term challenge.

Summary

The widespread use of USDT in Venezuela reflects a deeper reality: under extreme national pressure, cryptocurrencies and stablecoins have transcended their role as speculative tools to become tangible economic necessities. This is not merely a story of technological innovation, but a collision of financial realities and geopolitical forces.

For the entire industry, this serves as a reminder: the future of stablecoins depends not only on technology and markets but also on how they find their place within the global regulatory framework. For Tether, how it responds to these regulatory pressures will directly impact its position in the global stablecoin market.