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Venezuelan nationals (CRIS BOURONCLE / AFP)
- Venezuela’s currency lost 99% of its value during three years of hyperinflation
- Cash is now only used for public transport, and the Caracas metro regularly stops charging passengers due to cash shortages.
- President Nicolas Maduro said in an interview that there is a “ war ” against Venezuela’s physical currency and that the country will transition this year to a “ deeper digital economy ”.
The Venezuelan government is considering moving to a fully digital economy, as hyperinflation has all but wiped out worthless Bolivar bills and dollarization spreads through the local financial system.
The US dollar has functioned as a leak valve for Venezuela amid US sanctions and the collapse in oil revenues, President Nicolas Maduro said in a television interview with Telesur on Friday. According to him, 18.6% of all commercial transactions are in dollars, while 77.3% are carried out in bolivars with debit cards. Only 3.4% is paid with bolivar tickets.
“They have a war against our physical currency. This year we are heading towards a deeper, expanding digital economy. I set the goal of a 100% digital economy, ”Maduro said, adding that physical money would eventually disappear.
Venezuela’s currency has lost 99% of its value during three years of hyperinflation, forcing the country to issue higher value banknotes which in turn become useless in record time. The largest banknote currently in circulation, 50,000 bolivars, is worth around $ 0.04. The government has delayed plans to issue a bill for 100,000 bolivars, which is currently worth less than $ 0.10.
After the rise in once-subsidized fuel prices in June, cash is now only used for public transport, and the Caracas metro regularly stops charging passengers due to cash shortages.
Since late 2019, local banks have slowly started offering US dollar accounts and financial products, but these remain limited as there is no clearing system in place to enable digital US dollar transactions.
Some banks have had technical meetings with the central bank of Venezuela in an attempt to resolve the issue amid high skepticism and caution due to US sanctions. But Maduro is committed to creating “payment formats” that allow transactions using US dollar savings and checking accounts.
A Venezuelan Central Bank press official did not immediately respond to a request for comment.
Although he promised to expand the use of the U.S. dollar in the economy, Maduro said formal dollarization would not occur.
“Venezuela has its currency and we are going to defend it,” he said.
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