Which Of The Following About Fiat Money Isã¢â‚¬â€¹ False? Fiat Money

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OFAC Doesn't Empathise How Digital Currencies Work

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Posted by at 1:50 pm on March 20, 2018
Category: Cryptocurrencies • OFAC • Venezuela

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Above: Nicolas Maduro

Yesterday the White House issued an executive order prohibiting U.S. persons from transactions in the Petro, the new Venezuelan digital currency. As yous might call back, OFAC initially suggested that dealings in the Petro would violate restrictions on providing debt financing to the Venezuelan government, an thought that I said was a foolish misunderstanding of the deviation between debt and currency.

The new executive order does what it should have washed to begin with: restrict the digital currency straight. Of class, as the only current and guaranteed use for the Petro is to pay Venezuelan taxes and authorities fees, it is doubtful that the Petro volition exist of interest to U.South. persons and, as a result, it is hard to encounter that the new executive order will have much impact, other than, I suppose, preventing U.S. persons  or persons in the U.South. from operating nodes in the P2P network for the Petro.

In addition to banning U.S. persons, the new society gave OFAC the opportunity to wade into digital currencies once more and shows central misconceptions well-nigh how digital currencies piece of work. Astonishingly, the new FAQs on digital currencies issued with the executive order suggest to add digital currency addresses as identifiers on the SDN List:

To strengthen our efforts to combat the illicit utilize of digital currency transactions nether our existing government, OFAC may include as identifiers on the SDN List specific digital currency addresses associated with blocked persons.

Oh. My. Goodness. They really said that. Next OFAC will be adding an SDN's favorite unicorn name as identifiers on the SDN List.

Here'southward what's wrong with this idea of using  digital currency addresses as identifiers on the SDN Listing: they are merely used once (unless you're particularly clueless). For each payment request, the requester generates a unique public and private cardinal pair. The digital accost is a hash of that central pair. The payment request is signed with the private cardinal and sent with the public key, allowing the authentication of the asking. When the individual wants to brand some other payment request, a new key pair and accost is generated.

So, if OFAC puts an address on the list, hoping to prevent U.S. persons from sending digital currency to that accost, it is a waste product of time because it is highly unlikely that address will ever be used once again for a payment asking (particularly once the address is on the SDN List). Nor will it prevent U.S. persons from receiving money from that address, because  the digital currency can exist transferred to a newly-generated address prior to sending the currency. (And this problem is non solved past looking at the last-sent-to address in a blockchain explorer, because that volition not establish that the new address is controlled by the same, presumably blocked person. If sent by the blocked person to an accost of an unblocked person, the transferred digital currency is no longer blocked because the blocked person no longer has whatsoever involvement in information technology.)

Of course, in the unlikely outcome that the SDN is non savvy enough to employ a dissimilar address for all of his/her digital currency transactions (or to use wallet software preventing accost reuse), and then he volition get caught by listing his reused address as an identifier. Just, I'm guessing the only people re-using the aforementioned address for all their digital currency transactions are working at OFAC.

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(No republication, syndication or use permitted without my consent.)

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OFAC Doesn't Sympathize How Money Works

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Posted by Clif Burns at 1:13 pm on January 23, 2018
Category: OFAC • Venezuela

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In a higher place: Nicolas Maduro

Venezuelan President Nicolas Maduro in December announced his plans to have Venezuela issue a commodity-backed cryptocurrency.  Although cryptocurrencies typically accept no backing, in that location is no reason that they could non.  In such a situation, the blockchain would take over the validation function normally performed past a central banking company.  Maduro'south cryptocurrency would, he says, be backed by oil, gas, diamond and gilded reserves.  The opposition dismissed Maduro'southward program and called him a "clown" for even suggesting the new currency.

Non to exist out-clowned, the Office of Foreign Assets Control last calendar week issued its ain FAQ on Maduro's vague and unimplemented plan:

551. In Dec 2017, Venezuelan President Nicolas Maduro announced plans for the Government of Venezuela to launch a digital currency. According to public reporting, Maduro indicated that the digital currency would carry rights to receive commodities in specified quantities at a later date. Were the Venezuelan authorities to upshot a digital currency with these characteristics, would U.S. persons exist prohibited from purchasing or otherwise dealing in it nether E.O. 13808?

A currency with these characteristics would appear to be an extension of credit to the Venezuelan government. Executive Order 13808 prohibits U.S. persons from extending or otherwise dealing in new debt with a maturity of greater than 30 days of the Government of Venezuela. U.S. persons that deal in the prospective Venezuelan digital currency may be exposed to U.Southward. sanctions hazard. [one/nineteen/2018]

Oh honey. They really said that? Seriously??

For starters, permit's address the notion that using currency issued by a government is an extension of credit to the authorities. Credit is extended to a government when goods or services are supplied to that government without a requirement for firsthand payment. By that common and uncontroversial definition, accepting fiat coin or representative money in substitution for goods and services from a private individual is non an extension of credit by the purchaser to the authorities that issued the currency because no goods or services were supplied by the purchaser to the government. This is even the case even if goods and services are provided to the government considering the currency obtained tin be immediately used for other transactions and there is no delayed payment. If the government paid with a debt musical instrument, such equally a bond with a future maturity, and so that would exist an extension of credit to the regime.

It appears that the genesis of OFAC's misconception hither is that the currency can be exchanged afterward with the government for the underlying article. Even were that an extension of credit to the regime, OFAC'southward rules would only be implicated if that commutation was delayed for more than 30 days. Just, of course, the point of commodity backed currency is that information technology is immediately convertible. One could take the new Venezuelan currency and immediately need to exchange information technology for oil, gas, golden or diamonds, so it does not have a "maturity of greater than 30 days."

You know, y'all would retrieve that the people at the Treasury, of all places, would understand how money works.

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Copyright © 2018 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

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OFAC's FAQs on Venezuela Sanctions Omit the Nearly Ofttimes Asked Question

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Posted past Clif Burns at eleven:49 pm on August 30, 2017
Category: OFAC • Venezuela

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Final week the Office of Foreign Assets Control ("OFAC") announced a set up of new sanctions on Venezuela and it'south petroleum visitor Petroleos de Venezuela, Southward.A. ("PdVSA") every bit set along in the newly published Executive Lodge 13808. Nether the Executive Society, U.S persons are prohibited from dealing in (1) new debt of the Government of Venezuela extended after August 24 with a maturity greater than 30 days, (2) new debt of PdVSA extended after August 25 with a maturity greater than 90 days, (3) bonds issued by the Government of Venezuela or (4) dividends or other profit distributions paid to the Government of Venezuela by entities owned by the Government of Venezuela. At the aforementioned fourth dimension, information technology issued four general licenses authorizing, amid other things, wind-down transactions, transactions involving CITGO and transactions involving agricultural commodities, medicine or medical devices.

The prohibitions on dealing in new debt closely parallel similar restrictions that OFAC imposed on sure Russian entities and, in fact, OFAC issued FAQs on the new Venezuela debt prohibitions that are identical to the FAQs on the Russian debt prohibitions. Every bit a event, and once again, OFAC doesn't respond in its FAQs what is in fact the almost frequently asked question near new debt — namely, does new debt cover instances where PdVSA or the Regime of Venezuela fails to pay for goods or services rendered within 30 or 90 days after the services are rendered or the appurtenances are provided.

Certainly, information technology seems articulate that information technology would be debt where the contract provides for and allows payment afterwards these 30-solar day and 90-twenty-four hours periods as applicable. But suppose, you have a contract with PdVSA which provides for payment net xxx. Does that become "new debt" with a maturity greater than xc days when, on day 91, PdVSA fails to pay? And since the FAQs say that the prohibitions practice not extend to debt extended prior to August 25, 2017, when was this debt extended if the goods or services were provided prior to Baronial 25. Did that occur on Day 31? Or 24-hour interval 91? Given what appears to be the not uncommon do of these 2 entities of not paying on time, these are not simply encephalon teasers that I have cooked up to tease the folks at OFAC.

Of class, information technology seems that there would exist a skillful argument that an involuntary extension of debt in such a state of affairs should not be covered, although zippo in the gild or the FAQs makes this clear. If such involuntary extensions are included in the prohibitions, should the contracting political party file a voluntary disclosure as presently as possible afterward PdVSA accounts receivable age out over 90 days? And even if involuntary extensions of debt are exempted, what does the political party to the agreement with PdVSA or the Authorities of Venezuela accept to do to prove that the extension of debt is involuntary. Sue? Withhold further services? Terminate future deliveries? Transport a nastygram from its lawyers demanding payment?

Rather than respond these questions, which, no incertitude, big numbers of people with accounts receivable from PdVSA or the Government of Venezuela are asking at this very moment, OFAC's FAQs dither effectually on the esoterica of, amid other things, whether the new sanctions prohibit getting banking concern financing to buy goods from PdVSA (no) or prohibit maintaining contributor accounts for state-owned Venezuelan banks (no, as long equally no debt of greater than 30 days is extended). This is all baffling and simply further evidence that the people at OFAC who administrate these regulations have picayune thought of how business concern really works.

Photo Credit: CITGO Gas Station by Mike Mozart [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/oMJJ6w [cropped]. Copyright 2014 Mike Mozart

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or employ permitted without my consent.)

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Venezuela Joins the Centrality of Evil

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Posted by Clif Burns at 11:44 pm on November 12, 2014
Category: BIS • Venezuela

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It is probably safe to say that no one was especially shocked earlier this week when the Bureau of Industry and Security added Venezuela to the list of countries (currently Russia and China) to which certain dual use items may not exist exported if these items are for military machine end use. The specific items subject field to this brake are those listed in Supplement 2 to Part 744 of the Export Administration Regulations. These items include, among other things, certain composite materials, lasers, and aircraft navigational equipment.

The rule was adopted in last course and went into immediate effect on November vii.

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(No republication, syndication or use permitted without my consent.)

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Sen. Landrieu Attempts to Clarify the Tape … Merely Doesn’t

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Posted past George Tater at 8:28 pm on September 10, 2014
Category: Economic Sanctions • OFAC • SDN List • Venezuela

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On Sunday, in Lafayette, LA, The Advertiser printed an opinion from Sen. Mary Landrieu entitled, "Sanctions, as written, will hurt La. workers."  While we hoped Sen. Landrieu was writing to clarify the record in response to our post last week, she was writing instead to respond to an before opinion in The Advertiser written by Sen. Marco Rubio and Rep. Bill Cassidy.

Sen. Landrieu began past referring to the Lake Charles, LA oil refinery equally "owned by Citgo, a Venezuelan visitor with a strong and respected reputation in Louisiana."  Citgo, yet, is quite clearly a U.S. company, founded and incorporated in the United States over a hundred years ago.  It became wholly owned U.S. subsidiary of Petróleos de Venezuela, the Venezuelan national oil company, in 1990, but remained a U.S. visitor.  The hawkish view on U.S. sanctions is, of course, that Citgo, even though a U.South. company employing U.South. persons, is not immune from the conduct of its strange parent if, in this example, Petróleos de Venezuela's conduct were institute to be at variance with U.South. economic sanctions and was added to the SDN List, its subsidiary Citgo would exist as blocked and unable to utilize U.S. workers.

In her opinion, Sen. Landrieu continued to defend her opposition to the Venezuela Defense force of Human Rights and Civil Society Deed of 2014 because she believed that "the legislation as written was besides vague" and "will continue to oppose it unless the linguistic communication of this resolution makes crystal clear that there volition be no threat to the [Lake Charles] refinery."  Just, as we pointed out terminal calendar week, Sen. Landrieu’s references to alteration the Act accept led to no articulate (crystal or otherwise) suggestions on how to practise so.  We think we can help her out.

The Act, like other sanctions bills, already permits the President to waive the application of sanctions against a person if he determines that such waiver is necessary for the "national security interests of the United States."  The subpoena we recommend to Sen. Landrieu is to rewrite the waiver in Section 5(c)(i) to read, "The President may waive the application of sanctions under subsection (b) with respect to a person if the President determines that such a waiver is in the national security or economic interests of the United States."  By adding simply "or economic" to the waiver condition, the President has another avenue to defend non imposing sanctions confronting otherwise sanctionable foreign persons.  Once more, as nosotros pointed out concluding week, the President would not accept lightly a decision to cake Citgo's assets in Louisiana or anywhere else in United States.  Congress, moreover, would be hard-pressed to oppose a waiver if the President were able to show that imposing sanctions would have tremendous economical ramifications.

If Sen. Landrieu wants to take the position that U.S. economic sanctions against human rights violators tin't come with a toll that significantly harms the U.Southward. economy, there is a mode to protect that involvement.  Whether or not her position wins the solar day on the Senate flooring, nosotros call back the merely practical fashion to exercise so is to give the President more than discretion in how he may choose not to impose sanctions.  A tidy addition of the two words "or economic" should do the play tricks and put to bed another odd episode of "How a Bill Becomes a Law."

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Copyright © 2014 Clif Burns. All Rights Reserved.
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Source: https://www.exportlawblog.com/archives/category/venezuela

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