Venezuela’s digital bolivar can become a CBDC

At the beginning of this month of October, which we are about to say goodbye to, the digital bolivar in Venezuela, a new denomination of the fiat currency of the Caribbean country. This name can lead to some misunderstanding, despite its name. It is not a central bank digital currency (CBDC). In fact, it is possible to bring the currency to a CBDC, if you consider it, although this will require creating a blockchain on the digital bolivar, in order to make it transparent.

However, many consider that it is too optimistic to consider that the bolivar could become considered a central bank backed digital currency. However, the light handling of the concept of digital assets at the government level generates some confusion in the population and makes the task more complicated.

Experts consider that it is essential, in order to move forward, to clean up these types of concepts. Furthermore, it is considered that it is essential that there be a cryptocurrency and blockchain education in Venezuela; and also create educational centers in which technology is used, all to convert the bolivar into a digital currency. In any case, the bolivar should work on blockchain to make it reliable and there is greater transparency.

Is there infrastructure for a CBDC in Venezuela?

Currently Venezuela does not have the necessary infrastructure for the launch of a CBDC  in the country and thus be able to sustain everything that a digitalized bolivar entails. However, this is normal, since it is something that is being built, since countries do not launch this type of central bank digital currencies overnight.

In this way, we have been able to see how the Bahamas Sand Dollar has been developing since 2017 and China’s digital yuan since 2018. Therefore, implementing this type of digital assets in Venezuela would imply having to go through a long journey.

This is because it is not only the creation of the CBDC itself, but what its entire ecosystem, regulation, etc. entails.

Petro, the government token for public spending

Petro is the token created by the Venezuelan government in 2017 and is backed by the costs of raw materials, among which is oil. After arriving as a way out of the United States sanctions and as a boost to the local economy, the asset became initially highly promoted and then rarely used. What’s more, in public organizations only one price is taken as a reference for paying for procedures, but it is hardly used as a means of payment.

Although in certain cases it was used to pay, it must be taken into account that it is a token that has generated many doubts. The petro is currently only used by the Venezuelan government to close commercial deals in the public sphere and payment of services. However, it must be taken into account that it is supported by a very complex secondary market that is determined by supply and demand; and this depends on different geopolitical factors, linked to the oil tanker.

Although the government has tried to promote it through different regulations, the result of the use of the token has not been as expected. For it to really work, it would be necessary for the petro anchor to another asset, which would make it suitable for digital marketing. In Venezuela there is a greater adoption of other crypto assets, being in fact one of the nations that uses cryptocurrencies the most.