The Central Bank of Venezuela (BCV) announced this Thursday that there will be a new monetary reconversion as of October 1. The issuing entity indicated that six zeros will be eliminated from the currency and the so-called «digital bolivar», Which will coexist with physical pieces that will have a new monetary cone.
In addition, the issuing entity Indian that the so-called «digital bolivar»Will not affect the value of the currencyRather, it is done so that there is easier handling by reducing the monetary scale.
Meanwhile, the statement detailed that, “The reference exchange rate will continue to be the one determined by the Venezuelan Exchange Market System and will continue to be calculated from the foreign currency purchase and sale operations carried out by individuals and companies, through the exchange desks of the banking entities.”
In this sense, the BCV considers that by introducing the «Digital bolivar» progress will be facilitated to handle a «modern view of the coin»In daily transactions. In his opinion, it will allow the citizen to have a “greater connection” with the bolivar and reduce transaction costs in the economy.
With the new «monetary expression», As the BCV calls the reconversion, pieces of a new monetary cone are once again presented where the coins will returns. In addition, there will be bills of 10, 20, 50 and 100; all with the format that has been used since 2018.
The new monetary reconversion in Venezuela is registered almost three years after Venezuelan President Nicolás Maduro decided to eliminate five zeros from the then «bolívar fuerte» and move to the so-called «sovereign bolívar».
The current currency replaced the strong bolívar, created in 2007 although it began to circulate on January 1, 2008, which already meant the elimination of another three zeros from the Venezuelan currency, so the Venezuelan currency will have lost, after October 1 , 14 zeros in 13 years.
Digitization as an option
The BCV assured that the current “change of monetary scale “ is supported “in the deepening and development of the economy digital” in Venezuela and considers it as “A necessary historical milestone at a time when the country begins the path of economic recovery”.
Due to the devaluation of the current sovereign bolivar, the banknotes had practically all disappeared, since the one with the largest denomination, the one million bolivar, is worth about 25 cents on the dollar.
If you want to pay in bolivars, most payments are made by card or with automatic transfers through a platform called Mobile Payment.
Given the weakness of the bolivar and its low purchasing power, Venezuela is experiencing a process of transactional dollarization, which is why the US currency is the majority when making payments with cash.
The new bolivar, despite the fact that its creation is supported by the BCV in the digitization of the economy, will face a problem identical to that suffered by the sovereign: the bad connection of internet and constant power outages.
Due to these problems, it is impossible for citizens, on many occasions, to pay through platforms and even the use of dataphones.
They will go out of circulation
All current banknotes -among those of 50,000, 200,000, 500,000 and 1,000,000 bolivars, the highest denomination will go out of circulation.
However, in order not to exclude any Venezuelan, the Central Bank will continue to issue paper money. ‘‘The physical bolivar and the digital bolivar will coexist”, said the BCV.
In recent years, the shortage of paper money has also deepened. The clients of Venezuelan banks can withdraw a maximum of 20 million bolivars in cash per day, depending on the volume of pieces available at the bank headquarters.
Consequently, the majority of Venezuelans are obliged to make payments through electronic instruments.. The option of making a purchase with paper money in retail stores is almost impossible.
In this regard, the Central Bank stressed that payment systems will continue to be modernized to expand the use of the Digital Bolivar “dand immediately ”, thus facilitating transfers between clients of different banks to be received in a few seconds.
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