US Sanctions on Venezuelan Cryptocurrency

U.S. law firm Freehill, Hogan & Mahar LLP has issued a client alert providing details of Executive Order 13827 and its potential impact on the international shipping industry.

The Petro cryptocurrency was announced by the Venezuelan president in January 2018 and is backed by the country’s oil reserves. It was designed to create a new way to pay for goods and services and thereby minimise the impact of a previous US Executive Order that targeted financial dealings with the Venezuelan government and state-owned Petróleos de Venezuela, S.A.

Issued on 19 March 2018, Executive Order 13827, prohibits any US persons (including US shipowners and US banks) from engaging in any transactions relating to the Petro.

However, the alert raises the concern that non-US shipowners calling Venezuelan ports could be affected by the prohibitions set out in the Executive Order. Venezuelan authorities issued a circular on 23 March 2018 providing that all services rendered to foreign flag vessels must thereafter be paid in Petros, although it is understood that this requirement has not yet taken effect and financial transactions for these services continue to be paid in US dollars. There is a risk that any advance paid by a foreign shipowner to local Venezuelan shipping agents in US dollars could be used by them to purchase the cryptocurrency, which would be a potential violation by the bank and also the shipowner, which has caused that violation by the bank.

Freehill, Hogan & Mahar LLP summarise the new restrictions as follows:

“Foreign shipowners trading with Venezuela should exercise caution to be certain that any remittances made through the US financial system in connection with their Venezuelan trade are not ultimately being used to purchase Petros. In the wake of E.O. 13827 and the INEA Circular, it is anticipated that US banks will scrutinize all financial transactions relating to Venezuela with great care, particularly those involving shipping.”

The full alert can be read here.