This is a guest post from Sandeep Thomas Chandy, Research Fellow, Centre for Trade and Investment Law (All views expressed here are personal)
On December 28, 2018, Venezuela initiated a WTO dispute against the economic blockade instituted by the United States.[1] Among the various claims, one of special interest is the challenge against the US Executive Orders banning Venezuela’s national cryptocurrency (Petro). According to the Request for Consultations:
4. Discriminatory coercive trade-restrictive measures with respect to transactions in Venezuelan digital currency, adopted pursuant to Executive Orders 13808, 13827 and 13835
(xi) The coercive trade-restrictive measures of the United States to which Venezuelan financial services and financial service suppliers are subject, under which suppliers receive treatment less favourable than that accorded to like services and service suppliers of WTO Member States not subject to the measures, are in violation of Article II:1 of the GATS. Furthermore, inasmuch as digital currencies originating in the United States are not subject to the same prohibitions as Venezuelan digital currencies, the United States is according less favourable treatment to Venezuelan financial services and service suppliers than to like domestic financial services and service suppliers, in violation of Article XVII:1 of the GATS.
If this claim proceeds to the Panel stage, the WTO would be dealing with a dispute involving cryptocurrencies for the first time.
Venezuela’s National Cryptocurrency
In late 2017, President Maduro launched Venezuela’s national cryptocurrency – Petro. Like almost all cryptocurrencies, Petro is also reported to be based on distributed ledger technology.[2] However, unlike popular cryptocurrencies like Bitcoin and Litecoin, Petro was stated to be backed by Venezuela's reserves of oil, gasoline, gold, and diamonds.[3]
Challenge before the DSB
Venezuela has challenged the US Presidential Order banning Petro under Article II (MFN) and Article XVII (National Treatment) of the GATS. While an MFN violation would be relatively easy to establish, the National Treatment violation would require Venezuela to identify the sector/sub-sector in the US’ Schedule of Commitments which can include cryptocurrencies and then establish that the US is acting inconsistently with its commitments.
National Treatment, GATS Schedules of Commitments & Cryptocurrency
One way for Venezuela to establish the violation of National Treatment would be by stating that the underlying technology (distributed ledger technology) is being given treatment “no less favourable than that [the US] accords to its own like services and service suppliers”. For this, Venezuela would have to identify the specific sector/sub-sector involving blockchain technology in the US’ Schedule of Commitments. However, the dinosaur-era 1991 Central Product Classification (CPC) does not have any specific sector/sub-sector which can include cryptocurrencies or the technology running it. The closest sector/sub-sector would be “Computer and Related Services” and “data” related commitments under the Telecommunications sector (distributed ledgers are essentially a computer database).[4] Both these sectors/sub-sectors have been marked as “None” by the US. For stating that distributed ledgers are included in these sectors/subsectors, the holding of the Appellate Body in China – Audiovisual would be pertinent[5]:
In this respect, we note that GATS Schedules, like the GATS itself and all WTO agreements, constitute multilateral treaties with continuing obligations that WTO Members entered into for an indefinite period of time, regardless of whether they were original Members or acceded after 1995.
…
interpreting the terms of GATS specific commitments based on the notion that the ordinary meaning to be attributed to those terms can only be the meaning that they had at the time the Schedule was concluded would mean that very similar or identically worded commitments could be given different meanings, content, and coverage depending on the date of their adoption or the date of a Member's accession to the treaty.
According to this holding, new services and technological developments can be read into the generic terms in the Schedules.
Another way for Venezuela would be to argue that Petro is a digital security in the form of a cryptocurrency because it is backed by assets.[6] This argument will depend on whether a suitable sector/sub-sector is available under the Financial Services Commitments. One plausible sub-sector could be “Trading of Securities and Derivative Products and Services Related Thereto” on which US has taken full commitments. Venezuela can then state that the Executive Order banning Petro is inconsistent with US’ commitment.
It remains to be seen if Venezuela will take this dispute to the Panel stage and if they retain this claim to that stage. If they do, it would be interesting to see how the Panel would interpret the outdated Schedule to state that Petro/distributed ledgers are part of the Schedule.
[1] Request for consultations by Venezuela, United States - Measures relating to trade in goods and services, WTO Doc. WT/DS574/1.
[2] https://cryptoinsider.21mil.com/whats-really-happening-with-el-petro/
[3] https://www.nytimes.com/2017/12/03/world/americas/venezuela-cryptocurrency-maduro.html
[4] For the sub-sectors that fall under “Computer and Related Services”, refer WTO Doc. S/C/W/45.
[5] Appellate Body Report, China — Publications and Audiovisual Products, ¶396-397.
[6]https://in.reuters.com/article/us-venezuela-economy/venezuelas-congress-declares-petro-cryptocurrency-illegal-idINKBN1EY2H2;https://theconversation.com/dont-be-fooled-venezuelas-petro-is-not-really-a-cryptocurrency-92310