Ernesto, a gastronomic entrepreneur in Cumaná, a coastal Venezuelan city facing the Caribbean Sea, initially thought that Venezuela’s new digital bolivar — English translation of “bolivar digital” — would be similar to a central bank digital currency.
He even started talking with friends in different crypto chat rooms about the announcement, until he understood that “digital” was just in the name.
“It’s a normal currency, fiat money. They are going to print a bill,” said Ernesto, who preferred to keep his last name anonymous.
The new bolivar appears to be yet another attempt by the government to combat hyperinflation. Last year, according to the local central bank, inflation reached 2,958%, and some would argue that it was even higher.
Now, the digital bolivar consists of a new series of five banknotes and a government-issued coin that replaces the previous currency, the bolivar soberano, which was also known as the sovereign bolivar — English translation of “bolivar soberano” — from which six zeros have been removed. In other words, one digital bolivar is worth the same as 1 million sovereign bolivars.
There are no digital components that make the bolívar digital different from the sovereign bolivars, which could also be transacted electronically, Miguel López, a financial and accounting consulting partner at EY Venezuela, said.
The digital bolivar represents the third removal of zeros from the Venezuelan currency since 2008, when then-President Hugo Chavez removed three zeros from the original bolivar and created the strong bolivar (English translation of “bolivar fuerte”).
In 2018, beset by hyperinflation, Nicolás Maduro, the current president, removed five zeros from the bolivar fuerte and created the sovereign bolivar, which was removed from circulation last week.
