Venezuela’s central bank announces digital currency

The South American country is set to launch its CBDC in the coming months

Venezuela has confirmed that it will be launching a digital currency version of its bolivar in October, according to Bloomberg. The move comes just a few months after El Salvador announced it was adopting Bitcoin as legal tender. Venezuela, led by President Nicolas Maduro, has been enduring a tough economic time over the last four years. It has seen extensive runaway inflation, a situation that has prompted the implementation of several policies.

Bloomberg reports that the country will drop six zeros from the bolivar to save the currency “that has been wracked by years of hyperinflation”. At one point, the government was forced to adopt the US dollar to try and quash the issue. The announcement to launch a CBDC follows that of currency redenomination.

The Central Bank of Venezuela will oversee an SMS-based exchange system that will facilitate the adoption of the digital currency dubbed ‘Bolivar Digital.’ The new bills, as per the Bloomberg story, will be printed by the central bank and enter into circulation starting the first day of October. It is worth noting that Venezuelans still use the bolivar to complete simple transactions, albeit most have a liking for the dollar.

The bank urged Venezuelans to be receptive to the digital currency and use it to complete day-to-day transactions. The country hopes to address the inflation challenge by introducing the CBDC and removing six zeros from its currency.

Not all perceive the decision as positive though. Some believe that dropping zeros is only a short-term fix. Their argument isn’t far-fetched, considering the country has previously adopted similar changes not long ago. The bank addressed doubts on the impact of the changes explaining that the decisions would not affect the value of the bolivar.

“The bolivar will not be worth any more or any less, in order to facilitate its use, it is being taken to a simpler monetary scale,” the bank asserted.

The idea of a digital currency first surfaced in February when President Maduro tipped it as a potential approach to better the country’s economy. It wasn’t the first time the President interacted with digital currencies. He had previously instituted the Petro coin, a digital currency reportedly pegged to Venezuela’s oil reserves, to evade US sanctions. Last year, Maduro also suggested the adoption of cryptocurrency to get round sanctions.