The World’s First Nationally Run Digital Currency

Ecuador is currently creating an unnamed digital currency issued by their central bank. The entire process is based on mobile devices. According to recent surveys, most Ecuadorians have a mobile device that can be used for this program. Ecuador’s President Rafael Correa explained the system as a “debit card,” wherein people need to make deposits into their brand new accounts before they start spending. 

The concept of digital currency is not outrageous by any means – many countries including Scandinavia utilize it effectively. However, this is the first time the system is being centralized under the national government. In other cases, private banking services and the phone providers would work in unison to develop and manage the system. Last month however, Ecuador’s National Assembly banned all privatized and stateless digital currency and approved funding for the state-issued digital currency. 

While some analysts say that Ecuador is trying to gain more national stability by seeking economic independence, Correa denies any plan to replace the U.S. dollar since its official inception in 2000 with the previous currency, the sucre. Central Bank’s Deputy Director Gustavo Solorzano further insists that Ecuador does not intend on removing the U.S. dollar. He stated how Ecuador will have both currencies hand-in-hand for the betterment of the nation by providing a system for those who are unable to afford traditional banking.

While the digital currency is supposed to be backed by liquid assets, many fear it will be little time before the system is used with abandon. They particularly worry about abuse from Correa’s administration as they approach a severe deficit of $11 billion, primarily in debt to China. 

The government official in charge of the digital currency Fausto Valencia said the system is already effectively and successfully in operation within Paraguay by cellphone companies. The rest of the country’s system is set to launch in December. Many question whether this will be the answer to the 40 percent of Ecuador’s population facing economic hardship and the government’s growing debt.