Venezuela is increasingly turning to the Bitcoin cryptocurrency, raising questions about its possible use for money laundering and evading US sanctions, not unlike how Venezuela is already using gold trading.
In February, a new type of ATM appeared in Caracas – one that allows Venezuelans to exchange fiat currency for Bitcoin cryptocurrency, which now costs almost $ 60,000 per coin. The CEO of Caracas’ bitcoin ATMs said they are a “financial inclusion tool” in a volatile economy cut off from the dollar.
However, such machines are also ideal for laundering drug money, according to a recent report from the Drug Enforcement Administration. Unscrupulous owners allow large amounts of cash to be deposited into ATMs. Once the cash is digitized, it can be transferred to another user, hiding the origin of the funds and “eliminating much of the risk of transporting large amounts of currency,” the report said.
The DEA also warns that drug traffickers and money launderers are “increasingly using virtual currency” in trade-related money laundering activities.
What’s more, bitcoin ATMs emerged in Venezuela after the Bolivarian army announced in November 2020 that it would start using national resources to mine bitcoins. Mining is an energy-intensive process that creates new bitcoin by solving complex mathematical problems that help validate the coin’s ledgers.
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Leading cryptanalytic firm Chainanalysis estimates that just over one percent of global cryptocurrency transactions are illegal, and according to a FinCEN file report prepared by the International Consortium of Investigative Journalists and BuzzFeed News, the vast majority of illegal proceeds are still laundered through the traditional banking system. not cryptocurrency.
However, the announcement by the Venezuelan army has raised questions about how the Venezuelan government might use Bitcoin to hide illegal activities, especially as both the DEA report and other recent Chainalysis research warn that the trend is picking up steam. In 2019, criminals transferred more than twice as many bitcoins as in 2018, concluded Chainalysis, citing “fraudulent” crypto exchanges that do not comply with money laundering rules as a weak link in the system.
InSight Crime Analysis
Neither bitcoin ATM machines nor bitcoin mining by the Venezuelan army are illegal in and of themselves. But the Venezuelan government’s money-laundering and embezzlement schemes involving gold and Venezuela’s own cryptocurrency, oil, leave room for doubt.
To complicate matters, Bitcoin does provide Venezuelans with a way to insulate themselves from chaotic economic controls, hyperinflation, and Treasury Department sanctions. In fact, Venezuelans have used the country’s subsidized electricity for years to mine Bitcoin.
Thus, Bitcoin is more comparable to Venezuelan gold than traditional methods of money laundering. Gold was mined and sold as a way to obtain foreign exchange. As oil prices fell and inflation rose, Venezuela began mining gold in large and large quantities in order not only to maintain Venezuela’s solvency, but also to enrich the country’s political and military elite and avoid US control. In addition, it quickly became a favorite money laundering tool for transnational drug traffickers.
Cryptocurrencies can be attractive for the same reasons. In 2018, Venezuelan President Nicolas Maduro launched a digital currency dubbed “petro”, saying it “will push the country towards new forms of international financing for economic and social development.”
SEE ALSO: Venezuela’s New Digital Currency: An Economic Gamble or a Criminal Fraud?
Peter quickly went out of order. But Venezuelan money-laundering expert Alejandro Rebolledo wrote in his book: Asi se lava el dinero en Venezuela (Like money laundering in Venezuela) that the experiment was successful in another sense – it provided the Maduro regime with cover to create structures that would allow corrupt military leaders to launder money in the form of cryptocurrency exchanges.
These were the very crypto exchanges that Chainalysis warned about. And the evidence suggests that this is how they are used. In its 2020 cryptocurrency geography report, Chainanalysis examined seven crypto exchanges registered by the Venezuelan government. Most users probably tried to “save [their] wealth or move it somewhere to avoid sanctions, as most senior Venezuelans cannot open bank accounts in other countries, ”said Moises Rendon, a Venezuelan expert at the Center for Strategic and International Studies (CSIS).
In fact, when looking at just one platform, the report found that over 75 percent of transactions consisted of $ 1,000 or more in crypto, while Venezuelans make an average of 72 cents per day.
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