President Donald Trump’s executive order banning US residents from engaging in transactions related to Venezuela’s “Petro” cryptocurrency could give the federal government an opening to regulate cryptocurrencies more closely under the guise of national security.
The order, signed by Trump on Monday and effective immediately, makes it illegal for US citizens and residents to transact with the Petro or any other cryptocurrencies later issued by Venezuela, which has developed these tokens in an attempt to subvert US economic sanctions against the authoritarian Maduro regime.
The act also gives the US Treasury Department broad authority under the International Emergency Economic Powers Act (IEEPA) to take actions it deems necessary to uphold the moratorium on Petro-related transactions.
From the order:
“The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to take such actions, including promulgating rules and regulations, and to employ all powers granted to the President by IEEPA as may be necessary to implement this order. The Secretary of the Treasury may, consistent with applicable law, redelegate any of these functions to other officers and executive departments and agencies of the United States Government.”
It is unclear what steps the Treasury Department — the Financial Crimes Enforcement Network (FinCEN) in particular — will take to prevent US residents and entities from engaging with the Petro, but the breadth of this order should give cryptocurrency users pause. Indeed, the IEEPA gives the executive branch the authority to not only regulate and prohibit not only transactions in foreign exchange but also the import and export of currencies and securities.
Given that Venezuela has reportedly accepted both Bitcoin (BTC) and Ethereum (ETH) payments for its tokens, it’s not difficult to imagine a hostile regulator using this incident as an opportunity to crack down on cryptocurrency usage. Investing in Bitcoin, for instance, increases the Bitcoin price, indirectly aiding the Maduro regime to the extent to which it is holding BTC.
Moreover, since the Petro reportedly runs on the NEM blockchain (which, of course, does not require an endorsement from the blockchain’s creators), could trading NEM tokens (XEM) or listing XEM trading pairs on an exchange be considered aiding Venezuela, since these actions add liquidity to the market?
Such discussions are currently pure speculation, and — given the careful stance with which other regulatory agencies have approached cryptocurrency — these fears will hopefully prove to be unfounded.
However, as CCN reported, Treasury Secretary Steven Mnuchin has said in the past that the agency is looking “very carefully” at Bitcoin and wants to prevent it from being used in connection with illicit activities. To this end, he has expressed his desire that cryptocurrency wallets should be regulated like banks, likely referring to third-party custodial wallets but perhaps betraying an ignorance about the fundamentals of cryptocurrency technology.