With the hype of the Crypto market all around the world, the southern region of the United States of America is also enticed towards entering into the virtual market. The banks in Venezuela Is Planning to Launch their Central Bank Digital Currency in October. It has been the first country to do this because of a lot of economical crises and the pressure of finances on the government.
The country’s crude oil reserves, which are the world’s largest, support the petro. According to Maduro, each coin will be worth it and backed by a barrel of Venezuelan crude oil. At the event, Maduro declared, “We have taken a great step into the twenty-first century.” We are at the cutting edge of technology. “The economy is planning to back up the whole system and run it in an organized and regulated manner’.
The Venezuelan central bank will oversee an SMS-based exchange mechanism that will aid in the adoption of the ‘Bolivar Digital’ digital money. According to a Bloomberg report, the central bank will produce the new bills, which will go into circulation on October 1st. It’s worth mentioning that most Venezuelans still utilize the bolivar for everyday transactions.
According to the Associated Press, the Venezuelan government would release 100 million Petros in the first year. The first 38.4 million coins went on sale Tuesday for $60 each. If investors buy all of the initial Petros on offer, the government will be able to raise several billion dollars.
What is The Reason For Launching CBDC?
Maduro’s initiatives to revamp the country’s economy include the CBDC. He announced in February that the digital bolivar was part of his plan to digitize the country’s economy completely by the end of the year. Venezuela’s economy would have been digitized to the tune of 77 percent.
To address Venezuela’s currency’s excessive inflation, the Central Bank of Venezuela announced that the issued CBDC would be devoid of six zeros and would instead rely on the short message exchange system (SMS) to promote public use. The decision was taken keeping in mind the ever-growing inflation rates and to drive the economy towards a digital system.
SANCTIONS BEING IMPOSED BY US
The government turned to Petro with the hope to revive its failing economy and counter the sanctions imposed by the US. Venezuela has been dealing with a long-running financial calamity as a result of US sanctions and hyperinflation wreaking havoc on the country’s economy. Maduro introduced an anti-restrictions measure in September 2020, aiming to use crypto as software to circumvent the country’s sanctions.
REMOVE THE ZEROS
Due to soaring inflation, the Central Bank of Venezuela will introduce a CBDC in October, along with a monetary redenomination that will remove six zeros from the currency.
The digital bolivar will enter circulation in the economy on October 1st. As part of the currency’s six-digit readjustment, a new one-bolivar coin will be issued, as well as banknotes ranging from 5 to 100 bolivars.
Although the Venezuelan government has stated that the petro is safe, little information about how it works has been released. Venezuelans will be able to use Petros to pay taxes and for public services, according to the Maduro administration. A digital currency controlled by the state could be one way of trying to create a more consistent value for its currency and will also turn the public towards a modernized system of working. Though certain risks are associated with taking such a major step with the whole economical system to get things back on track, certain influential decisions have to be taken.