- Title: ECUADOR-DIGITAL CURRENCY Ecuador set to launch world's first digital currency
- Date: 10th September 2014
- Summary: QUITO, ECUADOR (SEPTEMBER 09, 2014) (REUTERS) GENERAL VIEW OF CITY MOBILE PHONE TOWER
- Embargoed: 25th September 2014 13:00
- Keywords:
- Location: Ecuador
- Country: Ecuador
- Topics: General
- Reuters ID: LVA69XDRT4MCP44DOD36PTZSLQO4
- Story Text: Ecuador will put into circulation by the end of the year a new electronic payment system through mobile telephones and with government support, the country's chief economy official said recently.
The new payment system was approved in late July as part of a new law regulating the financial system.
Ecuador's Minister for the Coordination of Economic Policy, Patricio Rivera, said that the aim of the project is to expand access for the majority of the population to financial system operations.
"These systems are part of the technology and are not to be feared. Payment systems of this type have been developed in other parts of the world, in fact from the private sector. We believe that it (the payment system) is a service to society. Economists say that money plays an essential role in the economy and therefore the benefits of money has to reach everyone, not only those who have lots of resources and for that reason we have launched this initiative from the state. We want people to benefit from more efficient money management," said Rivera.
The new system is seen by some analysts and critics as a risk because it opens the door to the issue of money in an economy that has used the U.S. dollar as the circulating currency since 2000.
"Because with this (digital currency) you're hiding physical money that you can account for. With regards to electronic money, I'm not very sure if it will strengthen the dollarisation. The truth is I don't know," said Quito resident, Pablo Arias.
Other Ecuadorians are concerned about how secure the system will be since everyday there are developments in technology which opens the door to more types of crime.
"I don't think it (the digital currency) is the most secure neither the most reliable way considering that nowadays, with many hackers and electronic counterfeiting, it can be an easily managed way for thieves. I disagree with that," stated Quito resident, Jenny Martinez.
According to official data, only 40 percent of the economically active population have a bank account, but almost all Ecuadorians have a mobile phone.
To access the electronic money, people do not need a bank account.
They can buy the amount they require to carry out their business transactions directly from the country's central bank with dollars.
Cesar Robalino is the President of the Ecuador's Private Banks Association.
"Further down the line in the process, in a year or two, if the pressure of fiscal resources (becomes to great) the government will have to carry out its fiscal policy and it's public expenditure policy. If tomorrow these pressures are so immense, the temptation might be to create electronic money, dollars out of nothing, to accommodate public spending either to pay wages, salaries etc."
Ecuador has had current account deficits during the past four years, according to figures from the International Monetary Fund (IMF) published in April this year that projected a deficit equivalent to 2.4 percent of GDP.
However, Rivera said that the government sees it as a way to make everyone's life easier.
"Nobody will be forced to receive something that isn't dollars. This type of transactions will not be used to pay the salaries of a public official. They are basically electronic mechanisms to make life easier for all of us, for all of our lives," said the government official.
To implement the system, the central bank has signed agreements with two of the three mobile phone operators that are in the South American country, including the Spanish company Telefonica.
In May, agreements were signed with state run National Corporation of Telecommunications (CNT) and the government are in talks with Mexican company America Movil.
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