Venezuela planning a digital currency by Oct. 1
- Published: Sep 5, 2021, 8 AM
Necessity being the mother of invention, Venezuela is about to become a world leader in something other than inflation — on Oct. 1 its central bank will become one of the first in the world to implement a digital currency.
It is being called the “digital bolivar.” The Oct. 1 move is yet another reaction to the country’s rampant hyperinflation and will be accompanied by the issue of a 1-digital-bolivar coin and 5-, 10-, 20-, 50-, and 100-digital-bolivar bank notes that will circulate alongside the current notes.
The latter will have six zeroes slashed off their stated denominations. In other words, the face value of the old notes still in circulation will be divided by a million and remain legal tender.
The new 100-bolivar note will initially be worth about $25. The move is not a demonetization, but is being called an effort to simplify the payment process, accounting records, and computer systems.
The new currency all have the same standard portrait of Simon Bolivar on the face. The identical backs show a scene commemorating the 200th anniversary of the Battle of Carabobo, where in 1821, forces led by Bolivar defeated the Spaniards and led to Venezuela’s freedom from Spain.
The digital bolivar is not being called a central bank digital currency. It will use a SMS-based exchange system for transfers and transactions between its users.
When Venezuela introduced a cryptocurrency called the petro in 2018 that was linked to the nation’s oil wealth, it used the occasion to knock five other zeroes off the currency.
As is normal practice, the Central Bank of Venezuela blamed the United States for its problems. It said in a statement, “This change of monetary scale, which is supported by the deepening and development of the digital economy in Venezuela, constitutes a necessary historical milestone as the country begins the path of economic recovery, after the crisis produced by the brutal attack on our economy and national currency and the criminal application of an economic and financial blockade.”
In reality, most of the local Venezuelan economy functions with U.S. dollars.
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