Venezuela's Cryptocurrency Plans Draw Ire at US Senate Hearing

Venezuela's controversial plan to create an oil-backed cryptocurrency ignited debate and discussion at a U.S. Senate hearing Tuesday.

Held by the Senate Committee on Banking, Housing and Urban Affairs, which kicked off at 10 a.m. EST, the event notably saw CFTC chairman J. Christopher Giancarlo and SEC chair Jay Clayton discuss and respond to a range of questions, including the possibility their role as market regulators could be bolstered by new laws.

However, it was the issue of actions by other nations that saw notable discussion later in the session, when talk turned to Venezuela and public boasts by its President Nicolas Maduro that the country could use an ethereum-based cryptocurrency to avoid sanctions.

The issue was prominently raised by New Jersey Senator Bob Menendez, who asked whether both agencies would play any role in preventing the use of the cryptocurrency to avoid U.S. financial sanctions.

He also highlighted reports that Russia's government is considering a similar initiative.

Clayton and Giancarlo largely demurred on their answers, but the latter stated that the CFTC "wouldn’t hesitate" to act if the cryptocurrency were used specifically in an attempt to defraud U.S. consumers.

"We would certainly look at it," he went on to say.

Menendez blasted Venezuela's plan in a January letter sent to the U.S. Treasury Department, which he co-authored with Florida Senator Marco Rubio.

"We have serious doubts about whether Venezuela has the capacity to launch a cryptocurrency,” the two wrote at the time. "But regardless, it is imperative that the U.S. Treasury Department is equipped with tools and enforcement mechanisms to combat the use of cryptocurrency to evade U.S. sanctions in general, and in this case in particular."

Overall, the comments come amid what has been a period of heavy commentary by the legal community over the role cryptocurrencies could play in sanctions evasion.

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