Venezuela on Friday introduced the Bolívar Digital and trimmed down the denominations in its new currency notes—the country’s second monetary reconversion in three years—in a bid to simplify the scale of denominations in an economy ravaged by years of hyperinflation. Now, the new “highest” currency denomination will be the hundred bolivar note, down from the one-million handbill.
The new denominations do not change the fundamental value of the currency, with a 100 Bolívars worth a little less than $25. The Bolívar “will not be worth more or less; it is only to facilitate its use on a simpler monetary scale,” Venezuela’s Central Bank said in a statement.
The new denominations, cut down by a factor of one million, are aimed at simplifying transactions. In addition, the introduction of the “Digital Bolívar”—Venezuala’s central bank digital currency (CBDC) includes an SMS-based exchange system to facilitate payments and transfers.
The move may simplify book-keeping, with reports that machines in the country are struggling with the high denominations involved in all transactions. However, the fact that the currency is “digital” also helped buoy up the value of some cryptocurrencies—dollar exchange rates for Bitcoin and Ethereum surged on Friday.
Over 60 per cent of transactions in Venezuela are made in US dollars, economics professor Jose Guerra told AP.
A recent study found that 76.6 per cent of Venezuelans lived in extreme poverty, up by nearly 10 per cent from the figure seen last year. The 2020-2021 National Survey of Living Conditions found that roughly 95 per cent of Venezuelans lived in poverty when looking at income levels.
Since 2014, Venezuela has had the world’s highest inflation rate, and has suffered from hyperinflation since 2016. At its peak, hyperinflation in Venezuela was at over 53 million per cent.