After months of hyperinflation and unprecedented loss of value of their national currency, Venezuelan authorities have been looking at different proposals to rectify the issue. On Wednesday, Venezuela’s president Nicolás Maduro announced that the Bolivar will be replaced by a new national currency that will be anchored to the controversial cryptocurrency, the Petro.
In a televised announcement, President Maduro announced that the country’s new crypto-backed national currency will start circulating on August 20th, as reported by local state news agency Telesur.
Telesur reports that the new currency, the Bolívar Soberano (Sovereign Bolivar), will have five fewer zeros than the existing national currency, the Bolivar Fuerte (VEF), and will be anchored to the oil-backed Petro (PTR) digital currency. The Petro was launched by the government of Venezuela this February.
According to the President, the move will help curb the soaring inflation which Reuters predicted to hit a million percent this year.
The President said:
The economic reconversion will start on August 20 definitively with the circulation and issuance of the new Sovereign Bolivar, the new monetary cone [sic] that is going to have a new method of anchoring the Petro.
Maduro noted that the measure intends to align the financial and monetary systems in the country in a radical manner, stating that reconversion and anchoring to Petro is a great hope for developing a “productive, diversified and sustainable economic model.”
The President also said that the measure can help with the shortage of cash, as well as mitigate the long lines at ATMs that have become routine for Venezuelans.
Exercise in Futility?
During the announcement, Maduro expressed continued confidence in the Petro, declaring that the state-backed digital currency “will end up being consolidated technologically and financially”, and will embrace “all the national and international economic activity.”
However, the announcement has attracted widespread criticism from financial experts and politicians in the country. Speaking to Local 10 News, economist Maxim Ross claimed that the measure “does not solve anything.”
Opposition legislator and economist Angel Alvarado also spoke critically of the move, saying that “taking zeros off the money doesn’t fix anything,” and it won’t actually combat inflation in the economy.
Although it has been labeled ‘illegal’ by the opposition-led congress, the President has continued to support the country’s national cryptocurrency, the Petro, trying to integrate it into the nation’s financial system.
CoinDesk reported that in February, President Maduro ordered several state-owned companies to convert a percentage of their sales and purchases into the token to promote its uptake.
Recently, the Venezuelan government has initiated a number of social projects funded by the Petro. Earlier in July, the Ministry of Habitat and Housing revealed plans to initiate a housing construction program for the homeless, funded by the Petro. In May, President Maduro announced the launch of a Petro-funded crypto bank to support youth and student initiatives.
Do you think the new Petro-backed Venezuelan currency will be a success? Let us know in the comments section.