Author: Blockworks
Compiled by: Deep Tide TechFlow
Deep Tide Introduction: Venezuela's case is the most powerful real-world footnote for stablecoins—not because they chose crypto, but because they had no other choice. This article demonstrates the complete path of a sovereign nation forced to adopt USDT under sanction pressure, while also revealing the real limitations of stablecoins in large-scale money laundering scenarios.
"I don't think it's a bad thing, this so-called 'dollarization' process... Thank God it exists."
— Nicolás Maduro
A recent report by The New York Times stated that Venezuela has become "the first country to manage a large portion of its fiscal revenue using cryptocurrency."
But this was not an active choice.
Approximately half of Venezuela's revenue comes from oil sales denominated in U.S. dollars. As a sanctioned country, Venezuela cannot legally send or receive dollars.
Previously, sanctioned governments typically exchanged oil for dollars—or bartered oil for goods or infrastructure investments—through a network of shell companies and offshore banks.
Now, they have a simpler option: accept stablecoins as payment. Economist Asdrúbal Oliveros estimates that Tether's USDT is the medium of exchange for about 80% of Venezuela's oil sales.
The Venezuelan government once banned the use of stablecoins for transactions, viewing them as a threat to the bolívar. But the devastating impact of U.S. sanctions left it with almost no choice, ultimately forcing it to embrace stablecoins.
Venezuela's current interim president, Delcy Rodriguez, acknowledged the inevitability of crypto-driven dollarization as early as August last year. She told business leaders at the time that "non-traditional management mechanisms" were being implemented to better manage the bolívar exchange rate.
Reuters reported shortly thereafter: "The Venezuelan government has allowed greater use of USDT since June." With state approval, banks now sell USDT obtained from oil sales to local businesses, which use these stablecoins to pay domestic and international suppliers.
They also hope stablecoins will circulate at the retail level: the head of Venezuela's National Supermarket Association recently stated on national television that grocery stores are advancing system upgrades to accept USDT payments.
In other words, the Venezuelan government is encouraging the use of dollars issued by Tether to replace its own currency, the bolívar.
As a result, USDT—which many Venezuelans call "Binance dollars"—is now used in various scenarios, "from buying groceries and paying apartment management fees to issuing salaries and paying suppliers."
So, for a stablecoin enthusiast like me, it was quite disappointing to see that the U.S. government's indictment against Nicolás Maduro didn't even mention cryptocurrency or stablecoins.
The indictment describes illegal fund flows using the old ways: planes returning from Mexico "loaded with drug proceeds"; weapons like grenades bartered for cocaine; protection fees paid by sharing shipments of cocaine; and a $2.5 million cash bribe.
Why no mention of cryptocurrency?
There are two possibilities: 1) The U.S. government has stopped publicly criticizing crypto, and prosecutors know when to skip it; or 2) Crypto and stablecoins are still inadequate for the scale of funding required by Maduro and his associates. The former is more interesting, but the latter is more likely the truth.
"It is difficult for the state to quickly liquidate these [crypto] assets," explained Asdrúbal Oliveros, "because transferring crypto funds requires going through various controls that are currently not being met."
A report by TRM Labs reached a similar conclusion: "Large-scale drug trafficking organizations still heavily rely on physical cash, trade-based money laundering, and the protection of state or quasi-state institutions when moving core proceeds. Cryptocurrency typically plays a secondary or complementary role rather than replacing these mechanisms."
Analysts from the national security think tank Lawfare also agree: "Cryptocurrency-based sanctions evasion remains a drop in the bucket compared to traditional illicit finance channels."
Some are more optimistic about the practicality of stablecoins and crypto in the field of "international payments."
For example, InSight Crime reported that Mexican drug cartels are sustained by an "industrial-scale crypto money laundering pipeline" that funnels black money through digital networks to Chinese chemical suppliers.
They detailed a niche market where stablecoins have found a fit: acting as intermediaries connecting Chinese money brokers who need dollars to sell to clients circumventing China's capital controls, and Mexican drug cartels who need to buy fentanyl precursor chemicals from China.
This isn't the product-market fit crypto enthusiasts hoped for, but in terms of actual behavior, the fit is quite strong. For instance, the DEA stated that its seizures of illicit cash have significantly decreased because criminal groups are "placing cryptocurrency above traditional cash laundering schemes."
Correspondingly, seizures of "virtual currency" have risen significantly: between 2020 and 2024, the DEA seized $2.5 billion in cryptocurrency, compared to only $2.2 billion in cash.
This might explain why Maduro and his associates stick to more traditional payment methods—traceable cryptocurrency and freezable stablecoins are not yet ready for the largest-scale money laundering needs.
Nonetheless, Venezuela's embrace of the digital dollar is setting a precedent. Lawfare concluded: "U.S. adversaries have established a working proof-of-concept, and emerging financial technologies may further consolidate it."
If that's the case, the U.S. dollar itself might be further consolidated as a result.
Being prohibited from using dollars did not push Venezuela to adopt the yuan for oil settlements—instead, it led the government to switch to the digital dollar.
