After 15 years of taking a move in improving its monetary system, Ecuador is again changing its payment transactions, now with the help of digital currencies.
The South American country’s new monetary system, which fully kicked-off last February, was the first-ever state-run electronic payment system. Last December, Ecuador’s Sistema de Dinero Electrico allowed qualifying users to set-up their accounts.
The Ecuadorean government took this action to address its stumbling currency for the US dollar. The system is also designed to support the country’s dollar-based monetary system.
Among the advantages that this new monetary system offers is that it serves as the cost-saving mechanism for the government. Moreover, economist Diego Martinez, a delegate of the President of the Republic to the Board of Regulation and Monetary and Financial Policy said that aside from helping the poor, mobile payments will reduce the amount that the government will spend for exchanging old notes to US dollars.
One of the few first steps that Ecuador took is trying digital currency in paying taxi fares. The Central Bank of Ecuador signed a deal last February, involving 60,000 members of taxi organizations to accept electronic money. After this initiative, users will be able to select services and pay through mobile transactions. They can also send money between individuals. Later this year, the third phase of the electronic money system will allow users to pay for public services through mobile payment.
Ecuador’s new payment system does not require internet connection to be able to have successful transactions. Also it can be redeemed as physical money, and users will be able to make payment using their mobile phones and stored value on their accounts.
On the other hand, even the government cleared that digital currency does not aim to replace the existing payment system in their country, some professionals inside and outside Ecuador speculate that this step was taken by the government because of other motives. One of them is Mr. Lawrence White, Economics Professor at George Mason University. According to him, he found it reasonable for Ecuador to provide an exclusive medium for mobile payments. He sees this step as Ecuador’s maneuver to de-dollarization. He further explained that the government’s prohibition of Bitcoin last July is a proof that they have bigger plans, and sees it as potential move to exit US currency.
At the moment, the government still denies speculations that digital currency will allow Ecuador’s central bank to issue new money that isn’t straightly taut its U.S. dollar reserves.
Whether this step aims for de-dollarization or not, Ecuador took a major step in recognizing the advantages that digital currency is offering. This will surely have a large impact with Ecuador’s economy, positively or negatively.