In a televised speech on Sunday night, Venezuelan President Nicolas Maduro announced that the 100-bolivar note - the highest-denomination note in Venezuela, which trades on the black market for 2 U.S. cents - will be taken out of circulation in order to stem currency traffickers.
The Venezuelan government has decided to follow in the steps of the Modi administration in India, which unleashed chaos with its 500 & 1000-rupee ban in November, sold to the Indian public under the pretense of fighting terrorism and corruption.
According to Maduro’s speech, there are entire warehouses in neighboring Colombia, where in excess of 300 billion bolivares are hoarded by criminal gangs. Maduro accused “imperialist forces” of waging economic war on Venezuela in a bid to destabilize the country’s economic, political and social fabric.
The United Socialist Party of Venezuela published several photos on Twitter that allegedly show the storehouses of the traffickers.
Venezuelans will only be given ten days to swap their old banknotes for new, higher-denomination bills (500-20,000 bolivars), which will be introduced on December 15.
Additionally, Maduro explained that part of the 100-bolivar-ban is to catch the currency traffickers, who have been profiting by purchasing subsidized goods in Venezuela with notes bought on the cheap on black markets, off guard:
"I have given the orders to close all land, maritime and air possibilities so those bills taken out can't be returned and they're stuck with their fraud abroad."Opposition leaders in Venezuela have slammed Maduro for the unprecedented move. Henrique Capriles, Governor of Miranda and a fierce critic of the Maduro administration, took to Twitter to voice his disapproval.
An English translation of Capriles’ tweet reads:
“When ineptitude rules! Who can think of doing something like this in Dec and with the difficulties that we have? Maduro’s leadership!”
Cuando la ineptitud gobierna!A quién se le ocurre hacer algo así en Dic y con las dificultades que hay?Maduro y su cúpula! https://t.co/oaNqDMwlD9— Henrique Capriles R. (@hcapriles) December 11, 2016
The ban of the 100-bolivar note amounts to removing 48% of the currency notes in circulation. According to data from the Venezuelan central bank, there were six billion 100-bolivar notes in circulation in November.
Many tech-savvy Venezuelans have already turned to more unorthodox stores of value like Bitcoin to escape the hyperinflation of the bolivar. Trading in the digital currency has been on the rise in Venezuela as evidenced by the growing turnover on P2P Bitcoin trading sites such as LocalBitcoins. Weekly turnover on LocalBitcoins for last week in Venezuela came in at 5,598,594 Venezuelan bolivars (223 BTC) - the second-highest reading since 2013: