In 2000, Ecuador moved to ditch its stumbling currency for the U.S. dollar. Now more than 15 years later, the South American country is revamping its monetary system again—using digital currencies.
Ecuador’s Sistema de Dinero Electrónico (electronic money system) kicked off in December by allowing qualifying users to set up accounts, and it will begin acting as a real means of transaction this month.
Once the government flips the switch, the South American nation of 16 million will host the first-ever state-run electronic payment system. (Other countries, such as Sweden, use digital currencies widely, but they’re not state-sponsored.) But the Ecuadorean government says the scheme is designed to support its dollar-based monetary system, not replace it.
“Electronic money is designed to operate and support the monetary scheme of dollarization,” economist Diego Martinez, a delegate of the President of the Republic to the Board of Regulation and Monetary and Financial Policy, wrote to CNBC in a comment provided by a central bank spokesman.
Martinez said that Ecuador law expressly states that economic transactions are conducted in U.S. dollars.
Electronic money will not only help the poor, he added, but will act as a cost-saving mechanism for the government: Ecuador spends more than $3 million every year to exchange deteriorating old notes for new dollars, Martinez said. There would presumably be less wear and tear on the currency if much of it was stored at the central bank while citizens relied on mobile payments.
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