Ecuador may ditch dollar with world’s first govt-issued digital currency

Source: Associated Press

Ecuador may ditch dollar with world’s first govt-issued digital currency

Gonzalo Solano (AP) / 30 August 2014

Ecuador is planning to create the world’s first government-issued digital currency, which some analysts believe could be a first step toward abandoning the country’s existing currency, the US dollar, which the government cannot control. The virtual currency, which central bank officials say they expect will start circulating in December, does not yet have a name and officials would not disclose technical details, though they said it would not be 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 per cent of participants in the economy — too poor to afford traditional banking, officials say.

Users initially will be able to make and receive payments at minimal cost using their cellphones, Solorzano said. Such mobile payments schemes are already 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 US 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.


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