Centralized exchange in Venezuela

Requirement: Any natural or legal person intending to carry out activities related to crypto assets in Venezuela, including providing services that would encompass custody, must register with SUNACRIP and obtain the corresponding license. The law does not define a separate "custody license" but rather general licenses for "providers of cryptoactive services."

Decreto Constituyente sobre el Sistema Criptoactivo Venezolano (Constituent Decree on the Venezuelan Cryptoactive System), published in Gaceta Oficial Extraordinaria N° 6.370 on April 9, 2018.

Article 3 broadly defines "cryptoactive activities" and establishes SUNACRIP as the governing body.

Article 5 mandates that the exercise of any cryptoactive activity requires prior authorization from SUNACRIP.

Article 11 discusses the powers of SUNACRIP to regulate, supervise, and authorize cryptoactive activities and providers.

Legal entity establishment and registration in Venezuela.

Minimum capital requirements (which vary by license type, e.g., for exchange houses).

Compliance with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations.

Technical and operational capabilities.

Fit and proper requirements for directors and management.

Segregation of Client Assets Rules:

Specific Rules: There are no explicit, detailed regulations mandating the segregation of client digital assets from the custodian's proprietary assets.

Specific Requirements: There are no explicit requirements for custodians to obtain specific insurance or bonding for client digital assets against theft, loss, or operational failures.

General Capital: Licensed entities, particularly exchange houses, are subject to minimum capital requirements, but these serve as operational guarantees rather than specific insurance for client crypto assets.

Cold Storage Mandates:

Specific Mandates: Venezuelan regulations do not contain explicit mandates for the use of cold storage (offline storage) for digital assets.

Implied Best Practice: While not mandated, the use of secure storage solutions, including cold storage, would be considered an industry best practice and part of demonstrating "technical and operational capabilities" as required for licensing. However, the regulations do not prescribe the specific technical methods.

Adopted: While Venezuela does not explicitly use the term "Travel Rule" in its legislation, the principles underlying the FATF Travel Rule – primarily the identification of both the originator and beneficiary of a virtual asset transfer – are incorporated into its broader AML/CFT framework for cryptoassets.

Spirit vs. Letter: The Venezuelan framework emphasizes robust Know Your Customer (KYC) and Customer Due Diligence (CDD) for all users of regulated crypto services, and mandates reporting of suspicious transactions. This addresses the spirit of identifying parties to transactions, but the specific mechanism of inter-VASP information exchange for all transactions above a threshold is less clearly articulated compared to other jurisdictions directly adopting the FATF guidance.

FATF Status: Venezuela has been under increased monitoring by the FATF due to strategic deficiencies in its AML/CFT regime. While it has made commitments to address these deficiencies, its overall compliance and effectiveness are still under scrutiny. This means that while regulations exist on paper, their practical implementation and alignment with global standards can be inconsistent.

Constitutional Law of the Integral System of Cryptoassets (Ley Constitucional del Sistema Integral de Criptoactivos): This foundational law, enacted in 2018, establishes the legal basis for cryptoassets, mining, exchanges, and other related activities, and grants SUNACRIP its regulatory powers.

SUNACRIP Providencias (Administrative Orders): SUNACRIP issues specific administrative orders that detail the implementation of the Constitutional Law.

Providencia N° 094-2020 (dated October 16, 2020): This is a key regulation that establishes the "General Rules of Prevention and Control of Money Laundering, Financing of Terrorism and Proliferation of Weapons of Mass Destruction, Applicable to Virtual Asset Service Providers (VASPs) and Users of the National Cryptoasset System." This providencia is crucial for AML/CFT compliance in the crypto sector.

No Explicit Travel Rule Threshold: Providencia N° 094-2020, while mandating robust identification and transaction monitoring, does not explicitly set a specific threshold (e.g., 1,000 USD/EUR) for inter-VASP information sharing in the same way the FATF Travel Rule recommends.

Focus on Identification for All Transactions: Instead, the Venezuelan framework requires VASPs to:

Identify and verify the identity of all clients/users for any transaction, regardless of amount (Article 8 of Providencia 094-2020).

Maintain records of all transactions.

Implement risk-based approaches.

Suspicious Transaction Reporting (STR) Threshold: The focus is on identifying and reporting suspicious transactions to the National Financial Intelligence Unit (UNIF), rather than a blanket information exchange for all transactions above a specific amount.

Exchanges: Crypto-fiat and crypto-crypto exchanges.

All must be registered with SUNACRIP.

No Specific Protocol Mandated: Venezuelan regulations (Providencia 094-2020) do not specify particular technical protocols for Travel Rule compliance (e.g., TRISA, Sygna, OpenVASP).

Internal Systems and Reporting: VASPs are required to:

Entity Targeted: High-ranking officials from the state oil company PDVSA, the Superintendency of Cryptoassets (SUNACRIP), the Venezuelan Guayana Corporation (CVG), and associated private businessmen. Notably, Joselit Ramírez Camacho, the former head of SUNACRIP, was among those arrested. Violation Type: Corruption, embezzlement, illicit enrichment, money laundering, and treason. The scheme involved diverting billions of dollars in oil sales by conducting transactions outside official channels, often using cryptocurrencies and an parallel financial system to bypass sanctions and hide funds. Penalty Amount: The Public Prosecutor's Office initially reported the embezzlement of over $21 billion USD, though later estimates varied. Penalties include the arrest of over 60 individuals, confiscation of luxury assets (vehicles, real estate), and ongoing trials.

Outcome: A major political and economic scandal that led to a significant purge within the Venezuelan government and state-owned companies. SUNACRIP was effectively intervened and restructured, its functions curtailed, and its leadership entirely replaced. The scandal severely undermined trust in government-backed crypto initiatives and has had a chilling effect on the local crypto ecosystem, increasing regulatory uncertainty.

Entity Targeted: Individuals and businesses operating cryptocurrency mining farms or crypto exchanges without the required licenses, permits, and registration from SUNACRIP. This also often included those engaged in electricity theft to power mining operations. Violation Type: Operating illegal cryptocurrency mining farms, facilitating unregistered crypto transactions, non-compliance with SUNACRIP's regulatory framework, and in many cases, electricity theft. Penalty Amount: Seizure and confiscation of high-value mining equipment (ASIC miners, GPUs), shutdown of operations, and arrests of operators. Specific monetary fines, while stipulated in SUNACRIP regulations, were less frequently publicized compared to asset seizures.

Outcome: Forced compliance with the government's centralized crypto regulations, reduction of informal or illicit mining activities, and an attempt to consolidate control over all crypto-related economic activity within the state's purview. These actions contributed to a more controlled and less decentralized crypto environment in Venezuela.