Ecuador heralds digital currency plans

Published on NewsOK Modified: August 29, 2014 at 3:18 pm •  Published: August 29, 2014
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QUITO, Ecuador (AP) — Ecuador is planning to create what it calls the world's first digital currency issued by a central bank, which some analysts believe could be a first step toward abandoning the country's existing currency, the U.S. dollar.

The electronic money, which Central Bank officials say they expect will start circulating in December, does not have a name and officials would not disclose technical details, though they said it would not be a crypto-currency like Bitcoin. The amount of the new currency created would depend on demand.

Deputy director Gustavo Solorzano said it is to exist in tandem with the greenback and, by law, be backed by "liquid assets." It would be geared toward the 2.8 million Ecuadoreans — 40 percent of participants in the economy — too poor to afford traditional banking, officials say.

Initially, it 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, and 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.

The official in charge of the new currency, Fausto Valencia, said the software is already used in Paraguay by cellphone companies.

He said it is 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.

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