Quito, Ecuador: 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. Initially, it will be able to make and receive payments over cellphones.” 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 in July. The Leftist president, Rafael Correa, said the project’s 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. Nathalie Reinelt, an emerging payment analyst with the U.S.-based Aite group, said she does not understand any other motivation for creating such a currency than to allow Ecuador to increase its money supply. “It is far too early to know how they are thinking of making the electronic money work,” said analyst Juan Lorenzo Maldonado of Credit Suisse LLC.
