CARACAS (Reuters) – Venezuelan legislators voted on Thursday to clamp down on foreign exchange trading, while President Hugo Chavez threatened to close financial brokerages, which he accuses of undermining the bolivar currency.

Under the newly-reformed law, the central bank will control the ‘parallel’ currency market where the bolivar has crashed 25 percent against the dollar this year — a move the government says will end speculation but critics say could wreak economic havoc.

The law, passed in a second reading, will not take effect until it is published in the government’s Official Gazette and may be tweaked before that happens.

The free-floating market is essential to Venezuela’s economy as it provides currency for about half of imports, given restricted access to the dollar at two official rates of 4.3 and 2.6 for essential items.

In an evening speech, Chavez warned the brokerages who operate in the market to step into line with the new rules.

“If we had to eliminate the whole bunch of brokerages and I don’t know what, well eliminate them, this country does not need them, we don’t need this savage capitalism of these rich money-bags,” he said.

Chavez promised stern action last week after the bolivar slid to 8 per dollar, adding to economic woes including a deep recession and soaring inflation that are denting his popularity.

A senior government source told Reuters on Tuesday that there were no plans to ban foreign exchange outright in its present form, via bond trading, but that the government could try to establish a floor and a ceiling for the bolivar, linking it to sovereign debt prices traded overseas.

Amid the confusion over what the new exchange regime will look like, most brokerages have stopped accepting trade this week.

Analysts warn a prolonged paralysis of the trade could simply force the creation of a fourth, illegal dollar market, given high local demand.

“We are of the view that tightening the regulatory grip over the parallel market … and setting a band will be self-defeating as FX supply will likely go deeper underground and emerge somewhere else, probably with an even more distressed VEF/USD level,” Goldman Sachs analyst Alberto Ramos said in a research note on Thursday.

The government is determined to strengthen the bolivar’s rate on the free-floating market in a bid to counter one of the highest inflation rates in the world.

Consumer prices jumped a record 5.2 percent in April, driven by the rising cost of consumer goods in the import-dependent nation.