A gouache painting titled 'Composición con pájaro azul' created in 1942 by the Venezuelan modern artist Oswaldo Vigas. Photo: Oswaldo Vigas Foundation.
By Andrés Arauz and Michael Galant – Apr 3, 2026
Sanctions on the Venezuelan central bank
Following the US’s invasion of Venezuela on January 3 and abduction of President Nicolás Maduro and First Lady Cilia Flores, President Trump promised to “restore prosperity” to the country. His administration has now recognized the Delcy Rodríguez government and issued general licenses to ease sanctions on oil and mineral production, as well as licenses to disburse the proceeds from US-managed sales of Venezuelan oil. These measures have raised hopes that stability might be returning to an economy long stifled by Washington’s siege. But a key factor in any process of stabilization has so far been overlooked: the fortunes of the Banco Central de Venezuela (BCV).
In 2005, amid escalating tensions, the George W. Bush administration began to consider the use of sanctions against Venezuela, announcing an arms embargo the following year. A decade later, President Obama declared a “national emergency” with respect to Venezuela, deemed the country an “unusual and extraordinary threat” to US national security, and imposed sanctions on various state officials, explicitly naming the BCV as a part of the government. In 2019, the Trump administration went further, refusing to recognize the Maduro administration, removing its Federal Reserve certification and sanctioning the BCV as a part of its “maximum pressure” campaign to foment regime change.
The central bank sanctions and decertification of the BCV affected Venezuela’s entire economy and caused widespread suffering among its population. BCV is not just a government bank. As in most countries, it is a bank of banks for the public and private sector alike, acting as the “clearinghouse of the financial system.” Sanctions against a central bank therefore not only target the incumbent administration; they incapacitate the country’s entire financial infrastructure. Lifting them will be essential for Venezuela to recover.
Bank of Banks
The central bank’s main banking function is to act as bookkeeper for all banks in the national economy, settling transactions through the use of central bank accounts. In 2017 the BCV had 47 accounts open for local banks and financial institutions, which operated with 3,454 branches around the country and had about 46 million private sector accounts. The public sector, by contrast, had only 18 accounts. While the share of BCV deposits from the financial sector has declined—from 82 percent of deposits at year-end 2008 to 68 percent in 2015—it still sits at 53 percent today.
A central bank usually draws from foreign currency—typically dollar—accounts offshore when a local business has to send payments overseas. Local currency is thus removed from circulation in an amount corresponding to the reduction in central bank foreign currency holdings abroad. If a central bank has no access to such foreign currency holdings, it must physically ship foreign currency—usually dollar bills or gold bars—to the foreign bank through which the payment is routed. Because this kind of shipping is inconvenient and costly, central banks usually keep their gold and foreign currency holdings in other banks abroad.
A similar process takes place for private sector exports. Central bank correspondent accounts abroad channel cross-border payments from foreign buyers to local banks. Alternatively, if the central bank is prevented from having correspondent accounts abroad, the local bank usually turns to a private correspondent bank account that bypasses the central bank. In this case, the foreign currency related to the export earnings remain in the local bank’s accounts abroad and are never made available in the local economy. This contributes to a currency crisis, as foreign currencies are owned by local private sector actors but are not brought back to the local economy.
This is precisely what we saw happen with Venezuela’s foreign liquid asset holdings. Data on the BCV’s website corresponding to the international investment position—which includes the estimates for holdings of cash and opaque dollar-denominated assets abroad—shows that the Venezuelan private sector increasingly hoarded dollars outside of the central banking system, in Switzerland for example, even as the BCV’s reserves peaked and began to decline. In March 2019, the latest available figure, the amount held abroad was $133 billion. The $8 billion in central bank reserves (which were soon to be frozen) plus the $13 billion in public sector dollar holdings pale in comparison.
Bank for International Settlements (BIS) data for 2025 shows only $18 billion deposited in banks abroad, most owned by the non-financial sector in Venezuela, down from a peak of $73 billion in 2008. The lion’s share is deposited in the United States.1
Financial Siege
The BCV was not excluded from the global economy all at once but rather through a series of incremental restrictions, as the combination of sanctions and persistent US efforts to discourage business with Venezuela gradually toxified banking relations. The Global Sanctions Database lists Venezuela as a sanctioned country since 2006, around the time that Bush’s arms embargo initially triggered additional screening and reporting requirements. In 2011, Libya saw its central bank reserves frozen all over Europe and the US. Hugo Chávez tried to avoid the same fate by announcing the repatriation of $11 billion of Venezuela’s central bank gold reserves from Europe and the US back to the central bank’s coffers in Venezuelan territory.
In 2016, on the heels of Obama’s sanctions, Citibank, one of the world’s prime global correspondent banks, closed BCV’s correspondent banking accounts, likely in response to the increased perception of risk associated with doing business via the BCV.2 A 2017 IMF research paper analyzing bank account closures between 2012 and 2015 soon categorized Venezuela as a sanctioned country. BCV and the government responded with a diversification strategy with accounts in different countries: Turkey (Ziraat Bank), Hong Kong (CITIC), Russia (Evrofinance Mosnarbank), the United Arab Emirates (Noor Bank) and Portugal, among others. But the country’s macroeconomic challenges steadily worsened, and successive currency crises accelerated under the first Trump administration.
Trump imposed sanctions on a number of individuals including Simón Zerpa, who was both the Vice President of Finance for PDVSA and the President of Venezuela’s Economic and Social Development Bank and National Development Fund, and would soon become the country’s Finance Minister. Trump also issued an executive order halting any dollar debt issuances from Venezuela and its oil company to US citizens or persons within the US. Crucially, because the BCV is the paying agent for the Venezuelan government’s debt, this implied increased compliance costs due to enhanced screening of BCV transactions of correspondent banks in the US.
In September 2017, the US Treasury Department’s Financial Crimes Enforcement Network issued an advisory which reminded US financial institutions to “take reasonable, risk-based steps to identify and limit any exposure they may have to funds and other assets associated with Venezuelan public corruption,” which resulted in the closure of Venezuelan accounts in financial institutions, loss of access to credit, and other financial restrictions. By November of that year, Puerto Rican Italbank closed the BCV’s account, which had been used to process payments for food and medicine, due to “concerns about reputational risk.” By the following September the BCV had sought to preemptively repatriate its gold holdings at the Bank of England, “because of fears it could be caught up in international sanctions.” These holdings are currently worth about $5 billion: about a third of BCV’s reported reserves. Yet the attempt to reclaim them failed to get off the ground because of lack of shipping insurance and disclosure requests. In December, BCV officials and Finance Minister Zerpa traveled to the United Kingdom to demand the return of the BCV’s gold. A British parliamentarian warned the Bank of England at the time: “It is entirely inappropriate for senior officials of the Bank of England to meet with an individual who has been placed on the U.S. sanctions list for reasons of corruption.”
All this laid the foundation for the full-scale siege of BCV. The most consequential moves came in 2019 as the first Trump administration stepped up its efforts to topple the Maduro government. In January, the US recognized Juan Guaidó as Interim President of Venezuela and shifted its Federal Reserve Act 25B certification from Maduro’s government to Guaidó. As the Federal Reserve forbids FDIC-insured banks from processing transactions on behalf of another country’s central bank in the absence of 25B certification, this essentially acted as a significant sanction on the BCV. As a result, approximately $400 million in BCV assets at the Federal Reserve Bank of New York were forfeited to the so-called interim government. Three months later, the Trump administration followed up with direct sanctions on the BCV itself. The US Treasury’s Office of Foreign Assets Control (OFAC) designated the BCV as a sanctioned entity, resulting in the blocking of all of its US-based assets and effectively cutting it off from the international financial system.
The US designation had ripple effects. Later that year, when the UK followed Trump’s lead in recognizing Guaidó as president, the Bank of England was given a perfect excuse to refuse repatriation of the BCV’s gold on account of the recognition issue. A long lawsuit ensued and has not yet concluded. Venezuela also opened a case against the Portuguese bank Novo Banco after it froze $1.2 billion of assets belonging to BANDES, Venezuela’s development bank, and PDVSA affiliates. Caracas eventually won its case in 2023 and the judge ordered Novo Banco to return the money. But because of the OFAC designation, BCV has not been able to receive this cash, which would be a major boon for the domestic financial system and currency stabilization efforts.
In March 2020, in the midst of the pandemic, Maduro sent a letter to IMF Managing Director Kristalina Georgieva asking for a $5 billion emergency loan under the Fund’s Rapid Financing Instrument, normally accessible to all IMF members. He did not get a response. In August 2021 the IMF allocated $5 billion worth of Special Drawing Rights (SDRs)—a unique IMF-managed reserve asset—to the BCV, but the country was unable to access these resources in part because the IMF had joined the US and UK in not recognizing the Venezuelan government. As Alexander Main and Ivana Vasić-Lalović recently wrote, “If the nearly $5 billion of SDRs is released, it could help Venezuela’s central bank to fight inflation, which has soared following the US attack and oil blockade.”
But this was not the only reason the $5 billion remains blocked. Even if the IMF did recognize the Venezuelan administration, it would be near impossible for the BCV to find another central bank willing to transfer dollars to an OFAC-sanctioned BCV in exchange for the SDRs as it would risk secondary sanctions. Indeed, since the 2021 SDR issuance, other sanctioned central banks, such as Belarus’, Russia’s and Iran’s have not exchanged a single SDR in this way. Because of the OFAC designation, the BCV could not pay £18 million ($22.75 million) owed to the UK banknote printer De La Rue. The BCV was thus prevented from regularly printing its own money, the Venezuelan bolivars, instead forced to charter Russian aircraft to import banknotes from Goznak at premium rates.
Fallout
The cumulative impact of these measures led the BCV to pivot to an all-digital strategy for domestic payments in local currency. The main driver was not “fintech innovation” so much as the need to adapt to the artificial scarcity of physical cash. According to the BCV’s payments statistics, between 2017 and 2019 the use of ATMs collapsed and “Pago Móvil,” the Venezuelan interoperable mobile interbank real-time gross settlement system, was launched. In October 2025, Pago Móvil surpassed cards as the main means of payment in Venezuela.
A significant loss of correspondent banking relationships (CBRs) has occurred in the private sector as well, mainly due to overcompliance: even if private Venezuelan actors are not themselves under sanctions, foreign banks prefer to “derisk,” play it safe, and avoid business relationships altogether for fear of being subjected to secondary sanctions. Those doing business with a private Venezuelan firm may worry that even if a loose connection to the sanctioned central bank or another public sector entity is determined by OFAC, they are also at risk of being sanctioned. The IMF determined that US-imposed sanctions against a country were a major and statistically significant determinant for loss of correspondent banking relationships for that country between 2011 and 2015. The BIS reported that between 2011 and 2019 Venezuelan banks’ number of transactions with foreign correspondent banks fell by 87 percent and the amount transacted fell by 99 percent. Between 2019 and 2022, the amount transacted did not recover, though the number of transactions nearly doubled.
Statistics from the BIS and SWIFT demonstrate that the Venezuelan private financial sector lost 35.9 percent of their correspondents between 2011 and 2015, well before the 2019 sanctions. By 2018, they lost almost 70 percent. According to the IMF, the loss of direct correspondent relationships forces trade into “nested” relationships—operating through a network of lower tier banks, increasing transaction costs of private sector imports by 20 percent.
While there has been a general market trend towards derisking, this occurred much later and at a smaller scale in the rest of Latin America. By 2022, Venezuela had lost over 80 percent of CBRs; Mexico, by contrast, lost only 24 percent of CBRs and Colombia lost 36 percent during the same period.
As a result of the restrictions, Venezuelans with sufficient means now hold billions of dollars in US bank accounts which can be used to make payments between US accounts while physically in Venezuela. Many Venezuelans rely on US apps like Zelle to make payments, creating an informal parallel market of transactions that never enter the country. Others have turned to stablecoin cryptocurrencies like Tether (the US’s January 3 invasion of the country, sent the trading price of the dollar-linked coin soaring to $1.40 on the dollar, a hefty premium for Venezuelans seeking to hedge against depreciation). These shifts have given rise to the structural offshorization of the domestic payment system and a shortage of dollars in the domestic economy.
Under the pressure of a dollar shortage, BCV reportedly also turned to crypto, allowing the use of Tether in currency exchanges. So too did the state oil company PDVSA, which began using the cryptocurrency to settle its oil transactions. Yet even this is not sanctions-proof. Tether recently froze $182 million worth of the stablecoin in five crypto wallets that observers speculate were linked to Venezuela. Just weeks prior, JP Morgan announced that it was freezing the accounts of two stablecoin fintech firms linked to Venezuelan customers.
While some Venezuelan households and firms have plenty of dollars, those dollars are not being allowed to back local currency circulation in the domestic economy. This weakens the local currency and creates a depreciation-inflation spiral for large parts of the local population. Nor can private banks cannot repatriate their holdings back to Venezuela, which is why the proceeds from the recent US-managed sale of $500 million of Venezuelan oil—first deposited in a US-controlled bank account in Qatar and then disbursed with OFAC’s permission for specific uses by Venezuela—has caused such jubilation. A fresh batch of dollars is being injected into the Venezuelan private banks’ correspondent accounts abroad, and the private banks can then sell local currency to the central bank. Though the US government has framed this as a remedy for Venezuela’s economic woes, it is more a partial antidote to the poison administered by Washington itself. Were it not for US sanctions, the Venezuelan economy would not be in such desperate need of cash.
That the US government was able to unilaterally bring the BCV’s functioning to a halt, inflicting such profound damage to the Venezuelan economy, reveals the singular power wielded by the US in the hierarchy of the global financial system. Nations that do not issue major world currencies are vulnerable to the whims of the US and its sometimes capricious leaders. So long as the United States remains atop in the hierarchy in the global financial and monetary systems, it can wield the economic weapon.
Dollar holdings abroad, SDRs, and gold are money equivalents managed by the central bank, a state-owned institution. But once liquid, they are used to make payments on behalf of the entire economy, public and private. As much of these reserves back cash and deposits, they ultimately belong to their Venezuelan depositors, both people and businesses, not to the government. While the Trump administration has already begun to ease certain sanctions on Venezuela in an effort to catalyze investment, and has recognized Rodríguez as president, it has clearly not gone far enough.
OFAC delisting and 25B certification are crucial to recover SWIFT rails and reduce the shadow banking premium, to sever overcompliance and restore private banks’ relationships with foreign partners, to repatriate the billions from the Bank of England, and to redeem the SDRs for dollars. This reset would allow the BCV to resume its role as bank of banks, with a progressive and transparent repatriation of the payment system and careful long-term strengthening and stabilization of the local currency. This is precisely the ask of the new Venezuelan government. At the World Government Summit in February, Venezuela’s vice president of economic affairs Calixto Ortega urged the US to “allow us to have access to our own assets… If you allow us to function like a regular country, Venezuela will show extraordinary improvement and growth.”
The fact that the BCV is still being prevented from standing on its own two feet may speak to tensions within the Trump administration around the goals of US intervention in Venezuela. It’s possible that Marco Rubio’s State Department does not, in fact, want to see the Venezuelan economy thrive so long as Rodríguez, formerly vice president to Maduro, is in power. The hobbling of the BCV may therefore be an intentional continuation of the general sanctions strategy: deliberately create indiscriminate economic harm in order to increase the chance of an electoral defeat or uprising.
Trump himself, however, seems unlikely to have agreed to this approach. The current arrangement may simply suit his desire to keep the Venezuelan economy maximally dependent on the US, reliant on the liquidity that it controls. Yet this policy may ultimately be self-defeating, since Trump’s own interests—increased oil production and decreased migration—require that the BCV be allowed to do its job. As its future under the Rodriguez government now hangs in the balance, it is clear that targeting the central bank is not just another tool of statecraft. It is, rather, an attempt to cut out the beating heart of the country’s private financial system and force its people to suffer the consequences.
