How Maduro uses cryptocurrencies in Venezuela to counter Trump’s sanctions

The United States’ pressure campaign against Venezuelan President Nicolás Maduro is erasing the country’s brief economic recovery, leading many Venezuelans to prepare for yet another economic crisis.

The tightening of American sanctions this year caused inflation to return to triple digits, caused a free fall in the national currency, worsened blackouts and led the government, companies and citizens to accumulate dollars and cut spending.

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For Venezuelans across the political spectrum, growing signs of an economic recession revive memories of hardships many had hoped were behind.

Over the past decade, Venezuela has experienced the deepest recession of any modern nation outside a war zone. A combination of disastrous economic policies, corruption and US sanctions created prolonged hyperinflation, collapsed basic services, increased malnutrition and led millions to migrate to escape extreme poverty.

Maduro responded with a combination of political repression and a free-market economic overhaul. These measures have stabilized prices, boosted growth and made life more bearable for most Venezuelans, at the expense of eliminating the last remaining democratic rights.

The Trump administration’s decision in July to define Maduro’s government as a drug cartel and initiate a series of military and economic measures ostensibly aimed at stopping the flow of drugs from Venezuela is reversing these economic gains.

Economists estimate that Venezuela’s annual inflation rate will rise from 50% to 600% this year, and prices could begin to rise exponentially — a scenario known as hyperinflation — in 2026. The country will enter a recession next year, with the economy expected to shrink by 3%, according to the International Monetary Fund.

Venezuela’s main opposition movement and its allies in the Trump administration are betting that an economic crisis, combined with the aggressive US military campaign in the Caribbean, will fragment the Venezuelan government and end 25 years of the regime now led by Maduro.

They see worsening living conditions in Venezuela as an inevitable, short-term cost of reestablishing democracy.

But most Venezuelan economists and businesspeople interviewed in Caracas for this report argue that Maduro is much more prepared for this round of external pressure. They spoke and shared data anonymously to protect themselves from the Venezuelan government and possible US sanctions.

Shortly after Donald Trump’s victory, Venezuela’s government authorized the operation of the country’s first cryptocurrency exchanges, paving the way for a broader shift toward financial assets outside the reach of traditional sanctions.

Today, Venezuela sells most of its oil to China, receives payment in cryptocurrencies and then redirects part of these revenues to the national economy through authorized cryptocurrency exchanges.

In a matter of months, these measures transformed Venezuela into possibly the first country to manage a large part of its public finances with cryptocurrencies.

At the same time, Maduro’s vice president and economic czarina, Delcy Rodríguez, is privatizing Venezuela’s natural resources to increase export revenue, including handing over dozens of small, declining oil fields to private investors.

This has helped oil production grow 12% this year, boosting the country’s foreign currency earnings.

These signs of resilience have led some economists and businesspeople to argue that Maduro could prevent the looming recession from turning into a collapse. Other experts point out that it has a history of resisting financial crises.

“If there’s one country that proves that if you collapse your economy, it doesn’t change your government, it’s Venezuela,” said Francisco Rodríguez, a Venezuelan economist who studies sanctions at the University of Denver. “When the country becomes poorer, the government does not weaken.”

Venezuela’s current economic problems began with the Trump administration’s decision to change the rules governing Western oil companies’ operations in Venezuela.

Venezuela’s largest private oil producer, US-based Chevron, until March sold crude oil from its Venezuelan projects to the United States and delivered Venezuela’s share in dollars to local private banks.

These banks distributed the dollars to corporate clients, allowing them to pay for imports and drive economic growth.

Last year, Chevron injected nearly $2.4 billion into the Venezuelan economy, about a third of the country’s entire hard currency supply that year.

The Trump administration’s review of Chevron’s licensing put an end to these currency injections.

Starting in August, Chevron had to hand over half of its Venezuelan oil production to the state-owned PDVSA.

This oil added to the bulk of Venezuelan crude oil exports that PDVSA was already selling to China under similar payment schemes.

Chevron’s new operating rules have reduced the profitability of Venezuelan oil exports because PDVSA needs to offer discounts and pay intermediaries to circumvent sanctions.

But these new rules also give Maduro greater control over the economy by focusing his hand on the small amount of hard currency still entering the country.

Faced with the military threat from the United States, Rodríguez’s economic team decided to sacrifice growth and build financial reserves. They cut public spending and drastically reduced the portion of reserves used to defend the official exchange rate of the bolivar, the national currency.

Instead, the government attempted to protect the currency through repression. At least eight economists were arrested for publishing negative data, dozens of others were detained for publishing the black market exchange rate, and stores and restaurants were searched to ensure they sold products at the official exchange rate. Even so, the bolivar continued to fall.

However, even as it cracked down on the foreign exchange black market, the government was quietly becoming its dominant player. This year, the government began channeling some oil revenues into the economy through the two authorized cryptocurrency exchanges, which can trade bolivars at a weaker exchange rate.

This legal loophole allowed the government to maintain economic activity, at the cost of increasing the inflation rate.

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