Ecuador: the first country with state digital currency

In 2000, for a number of reasons, Ecuador abandoned its own currency, and switched to American dollars. 15 years later, Ecuador is reviving its own monetary system, but neither metal coins nor paper notes are foreseen - everything will be in a figure.

The new system is called Sistema de Dinero Electrónico (electronic monetary system), for the first time the state presented it in December, allowing qualified users (a small number of people) to have accounts in the system and work with digital currency like ordinary money. Now Ecuador, with a population of 16 million people, is the first country with the state digital currency and the corresponding payment system.

In other countries, such as Sweden, digital money is also used, but in Ecuador it is all supported at the state level. At the same time, the country's government claims that Sistema de Dinero Electrónico is designed to support the dollar monetary system (the digital currency is strictly tied to the dollar), and not to replace the dollar.
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“Electronic money was created to work and maintain the monetary dollar system,” comments Diego Martinez, an economist and senior official, on the situation. Martinez also reported that, according to the laws of Ecuador, economic transactions are conducted in US dollars.

According to the official , electronic money will help save money to the state: the fact is that Ecuador spends about $ 3 million annually on the process of replacing old bills with new dollars. It is likely that electronic currency will contribute to less wear on paper notes, provided that residents actively use the electronic system.

Nevertheless, many experts believe that the new system is aimed at dedollarization of the economy of Ecuador. In particular, this opinion is shared by Professor of Economics from George Mason University Lawrence White. While the authorities of Ecuador do not say anything about avoiding the dollar, this may be implied, since the dollar system has not fully justified itself. And the new digital currency allows the central bank of Ecuador to quickly issue new money that is not tied to the US dollar. However, the authorities have several times denied the existence of such plans.

In principle, the dollar system still helped the country to cope with inflation (its level is very low) and ensure a low interest rate. So the transition to a new currency may adversely affect the country's economy, leading to its collapse. Now monthly inflation in Ecuador is 3.67%, which is significantly lower than in neighboring Mexico, Chile, Costa Rica and Bolivia.

White also believes that the benefits of using digital currency, if the state will be a monopolist in this market, are too obvious.

Nevertheless, the introduction of a digital payment system is proceeding at a rather rapid pace. This week, the Ecuadorian government announced that it had signed an agreement with a large taxi company that was committed to accepting electronic money. The head of the taxi company has already said that he considers the digital system to be an excellent solution, since drivers do not have to worry about a lot of cash.

The launch of the second phase of the project, when users of the system will be able to choose the services and companies that will be paid in digital format, will be held in mid-February.

The third phase of the implementation of the electronic money system will be launched in the second half of the year, and its goal is to enable the users of the system to make mobile payments. The government hopes that in 2015 the system will already use half a million people. According to some experts, these hopes are quite real - most likely, more and more people will switch to a new payment system.

Not to be confused with bitcoin

It is worth noting that in July last year, Ecuador banned both Bitcoin and other decentralized payment systems and currencies. This was done to ensure that the state system did not have competition. Ecuador's digital currency itself is very different from cryptocurrency. The difference is that the state will control the system, this time, and the new currency will be pegged to the dollar, this is two.

In fact, the Ecuadorian system is similar to M-Pesa, a mobile payment service from Vodafone. In any case, some experts say so, including CoinDesk media editor.

The leadership of the country's central bank said that working with digital currency does not require a mandatory connection to the network. In addition, digital money at any time can be replaced with real dollars. According to bankers, electronic currency will simplify the lives of ordinary people in Ecuador, since only 40% of the population have their own bank account. And almost every inhabitant has telephones here. Currently, the government has signed several agreements with major mobile operators in South America.