Ecuador’s Digital Currency Explained

An Explanation of Ecuador’s Digital Currency
THEGUARDIAN.COM/Rachel Banning-Lover / REPORTED

40% of Ecuadorian adults don’t have a bank account, but is their new ‘currency’ more about escaping the US dollar?
How will Ecuador’s new ‘digital currency’ work?

Under a new monetary code, the Ecuadorian government in August released more information about plans for what they call a digital currency.

40% of Ecuadorians do not have access to a bank account, says Pablo Paredes, director of the Institute of Economics at the Universidad San Francisco de Quito. From December 2014 people will be able to exchange physical cash for digital money that they will keep in an electronic wallet on their mobile phones. “It’s no different from other mobile wallets offered in other countries.”

Who will use it?

It will take time for it to take off, says Alejandro Salas, the regional director for the Americas at Transparency International. People will have to learn to use mobile technology for banking, leaving the older generation particularly vulnerable to being excluded. Ecuadorians will also need to trust that their money is safe when they no longer have it in their hands. “It will take a change of mindset,” adds Salas.

As in other countries, it is likely that the electronic wallet will be used in addition to cash, and not as a total replacement by users, Paredes adds.

Yet digital units do have appeal over cash as they offer a cheaper way to transfer remittances and a more secure way to store their money, says Ben Dyson, founder of Positive Money.

“Economically, it should also boost the economy because more people will be able to trade further than they would have been able to do in the past.” Read Article

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