GOING DIGITAL: Ecuador plans digital currency
By Catholic Online (NEWS CONSORTIUM)
8/31/2014 (3 years ago)
Catholic Online (www.catholic.org)
In a bold move into the 21st Century, the South American nation of Ecuador is now planning digital currency. Some believe this will eventually lead to the nation's abandonment of paper and coin currency altogether - i.e., the United States dollar.
Some believe that Ecuador's new digital currency will eventually lead to the nation's abandonment of paper and coin currency altogether - i.e., the United States dollar.
LOS ANGELES, CA (Catholic Online) - Central Bank officials In Ecuador say they expect to start circulating the electronic currency this coming December. The currency doesn't have an official name yet, and officials would not disclose technical details. Officials have admitted that it would not be a crypto-currency like Bitcoin. The amount of the new currency created would depend on demand.
The new currency will exist in tandem with the greenback and, by law, be backed by "liquid assets," according to Deputy director Gustavo Solorzano, The digital currency would be geared toward the 2.8 million Ecuadoreans, 40 percent of participants in the economy, that are too poor to afford traditional banking.
The digital currency will be able to make and receive payments on cellphones, Solorzano said. Such mobile payments schemes are especially popular in African nations including Kenya and Tanzania, where they are privately run.
The new currency was approved while stateless crypto-currencies such as Bitcoin simultaneously banned by Ecuador's National Assembly last month.
Leftist President Rafael Correa has said the project's only problem is that it has taken this long, defending it against "pseudo-analysts who have appeared in the media trying to smear (it)." He denies any plan to replace the U.S. dollar, which Ecuador set as its currency in 2000 after a crippling banking crisis.
Fausto Valencia, the official in charge of the new currency, said the software is already used in Paraguay by cellphone companies.
Valencia says it's not like Bitcoin, whose advantage is in its technical underpinnings. Only a limited amount of Bitcoin can be minted. Without that safeguard, economists have warned, a government could theoretically create as much as it wants, risking inflation.
An emerging payments analyst with the U.S.-based Aite Group, Nathalie Reinelt says she does not understand any other motivation for creating such a currency than to allow Ecuador to increase its money supply and, essentially, devalue its U.S. dollar holdings.
"It is far too early to know how they are thinking of making the electronic money work," analyst Juan Lorenzo Maldonado of Credit Suisse LLC added.
Some believe it could be a first step to abandoning the U.S. dollar, Ecuador's currency since January 2000.
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