On March 19, 2018, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a new Executive Order related to Venezuela entitled “Taking Additional Steps to Address the Situation in Venezuela” (“Venezuela EO”) available here. The Venezuela EO is the first Executive Order that specifically targets the use of cryptocurrency. Please see our prior blog posts concerning the previous Venezuela-related Executive Orders: (i) Executive Order 13808 of August 24, 2017 here and (ii) Executive Order 13692 of March 8, 2015 here.
The Venezuela EO is aimed at curbing the Venezuela Government’s efforts to circumvent US sanctions through the use of cryptocurrencies. Specifically, the Venezuela EO prohibits “US Persons” (i.e., entities organized under US laws and their non-US branches; individuals and entities physically located in the United States; and US citizens and permanent resident aliens, wherever located or employed) from engaging in (i) all transactions related to, provision of financing for, and other dealings in, (ii) any digital currency, digital coin, or digital token, (iii) that was issued by, for, or on behalf of the Venezuelan Government (iv) on or after January 9, 2018.
Based on this description, the prohibitions on dealing in Venezuelan Government-issued cryptocurrencies would apply to (i) any digital currencies that have not yet been developed but are later issued by, for, or on behalf of the Venezuelan Government and (ii) any digital currencies issued by parties other than the Venezuelan Government where the proceeds obtained are “for, or on behalf of” the Venezuelan Government. Other cryptocurrencies, such as cryptocurrencies issued before January 9, 2018 by the Venezuelan Government or cryptocurrencies not issued by, for, or on behalf of the Venezuelan Government, would not be subject to the Venezuela EO. However, such cryptocurrencies would be treated identical to any other funding source and therefore would be subject to the restrictions found in the previously issued Executive Order 13808.
OFAC also issued three additional FAQs related to Venezuela EO, available here. The FAQs clarify the following:
- “Petro” and “petro-gold” (i.e., a cryptocurrency backed by precious metals and issued by the Venezuelan Government) are considered to be digital currencies subject to the prohibitions of Venezuela EO;
- the bolivar fuerte (i.e., Venezuela’s traditional fiat currency) is not considered subject to the prohibitions of Venezuela EO; and
- absent authorization from OFAC, any US Persons that purchased Venezuelan Government issued cryptocurrencies after January 9, 2018, are prohibited from engaging in any transactions related to, financing for, and otherwise dealing in such currencies after the issuance of Venezuela EO. This means there is no grandfathering for those that purchased or otherwise dealt in cryptocurrencies issued by the Venezuelan Government after January 9, 2018, even if such dealings were before the issuance of the Venezuela EO on March 19, 2018.
OFAC has also clarified in its separate new Virtual/Digital Currency-related FAQs (here) that, among other things, OFAC compliance obligations are the same regardless of whether a transaction is denominated in digital currency or traditional fiat currency. Companies should consider developing compliance programs that are tailored and risk-based, taking into account the pseudo-anonymous nature of cryptocurrencies.
Lastly, OFAC also added four individuals to the Specially Designated Nationals and Blocked Persons List pursuant to Executive Order 13692. Additional information regarding the designated individuals and Venezuela EO is available here.
The authors thank Samuel Kramer, a partner based in our Chicago office with expertise in, among other things, cryptocurrency, for his contribution to this blog.