Venezuela to Redenominate its Hyper-Inflated Bolivar

Venezuela's Central Bank unveiled a new "Digital Bolivar" redenomination scheme yesterday for its fiat currency, aiming to make transactions easier by removing six zeros from the currency's existing value.

While it bears the name "digital," it has nothing to do with the proposed creation of a new central bank digital currency (CBDC), but it claims to be working toward the development of a digital economy in the country. The measure's goal is to "reduce transaction costs in the economy" and "advance in the construction of a modern vision of the currency in everyday transactions," hence the name.

At the time of writing, the exchange rate is 4,000 VES per dollar, resulting in uncomfortably high sums when conducting fiat currency transactions or payments.

The Central Bank of Venezuela claims that the change will improve the fiat currency, paving the way for the recovery of the country's economy, which it claims has been wracked by a series of economic attacks and a financial blockade, referring to the US government's economic sanctions against Venezuela.

Third Redenomination Plan for Venezuela

This is the third redenomination plan implemented by the Venezuelan government in less than 15 years, a testament to the country's humongous inflation during that time. The first redenomination plan, which changed the name of the currency by adding the "strong" prefix to its name, happened in 2008 when three zeroes were slashed from the currency.

Inflation and devaluation persisted, and officials were forced to organize a new redenomination plan in 2018, which removed five zeros from the currency.

The implementation of this plan also includes the printing of new notes based on the new currency value. On October 1, all financial institutions and payment processors will be required to adjust their systems to enable the execution of this plan.