The application of the new monetary conversion in Venezuela will take effect as of October 1st. The BCV explained that the value of the physical bolivar would not differ from that of its digital form.
The Central Bank of Venezuela (BCV) recently confirmed the application of its new currency conversion in the country. That would be the third since 2008, when Venezuela slashed three zeros from the national fiat currency. The body governing monetary policies will remove six zeros from the bolivar, now called the digital bolivar.
The measure will take effect from October 1st, the BCV announced in a statement. People must now divide all the amounts of money expressed in bolivars by 1,000,000. For example, VES 5,000,000 will be five digital bolivars starting next month.
When formalizing its decision, the issuing entity explained that the digital bolivar does not affect the value of the Venezuelan fiat currency. The bolivar will not be worth more or less but is moving to a simpler monetary scale to facilitate its use.
That measure could lead to the elimination of the physical version of the bolivar. However, the BCV said that it would continue to address the issuance of banknotes and possible coins. The entity said that both the physical bolivar and the digital bolivar would coexist to rescue its strength.
The bank also discussed the exchange rate with other national currencies such as the US dollar and the euro. They indicated that the rates would continue to align with the Venezuelan Exchange Market System. According to the financial institution, the exchange desks of banking entities serve to calculate the variations of the bolivar against other currencies.
The Bolivar Has a New Name, But It Is Still the Same Currency
The BCV stated that the digital bolivar would be the same traditional bolivar already in circulation in Venezuela. It would not be a new currency based on Bitcoin technology or related to a Central Bank Digital Currency (CBDC).
In this scenario, the BCV also does not mention the status of Petro (PTR), a cryptocurrency project that Nicolás Maduro promoted. What the bank does say is that the digital bolivar will facilitate interbank transactions.
Currently, Venezuelan users must wait several hours or days for the funds they transfer between different banks to become available. According to the bank, the entry into force of the digital bolivar will allow these transactions to be almost immediate.
Concerning the two previous currency conversion processes, Venezuela has slashed fourteen zeros from the bolivar. In other words, one unit of the digital bolivar is equivalent to 100,000,000,000,000 bolivars from before 2008.
In addition to the Venezuelan fiat currency, the inhabitants of the South American country use the US dollar. Likewise, a growing number of people are now using Bitcoin and other cryptocurrencies to purchase essential goods. Venezuela is the third country that has adopted cryptocurrencies worldwide, according to a 2020 Chainalysis report.
Venezuelan inflation is the highest worldwide, evident in the continued devaluation of its national fiat currency. The Central Bank of Venezuela hopes that the implementation of the digital bolivar will help control this situation.
By Alexander Salazar
