Venezuela’s Central Bank plans to launch a CBDC, including a financial redenomination in October. This readjustment will eliminate six zeros from the money due to exploding inflation. As a result, the Venezuelan bolivar will commence as of October 1 in the economy. Its currency equivalent will get banknotes varying from 5 to 100 bolivars, also will get a new 1-bolivar coin as the basis of the six-zero currency regulation.
On August 6, Venezuela’s Central Bank asserted the announcement. It said that central bank digital currency and redenomination of the money would not affect the bolivar’s value, and it is a step to facilitate the use of the currency. Moreover, an SMS-based exchange system can access the CBDC for the payments and transfers among its users.
Venezuelan President’s Commands
Back in February, Nicolas Maduro, Venezuelan President, annoyed the impression of a digital bolivar. He said that the implementation of CBDC was one of the efforts the government was carrying out to rebuild and update the economy. In 2018, Mr. Maduro already initiated the oil-pegged Petro coin as a weapon to evade United States sanctions. However, the president is no stranger to state-issued digital currencies. Moreover, this is the second step that Venezuela readjusted the bolivar three years after Maduro eliminated five zeros from the money as inflation was as massive as 1.8 million percent in 2018. According to the annual inflation of 2020, the estimated rate was 2,300%.
Luis Vicente Leon’s Statement
On Thursday, President and economist Luis Vicente Leon said that eliminating those zeros does not solve any problem until finding the reason originated. He also adds that without settling the root of the problem, the problem will last for months.
In addition to that, Venezuela has been facing a long-term economic problem as the economy suffers from U.S. penalties. Furthermore, Maduro proposed an anti-sanctions bill in September 2020 that strived to utilize crypto as a weapon to avoid the sanctions assessed on the country.