Why is Ecuador going to have a virtual currency? Different opinions

Posted on September 15, 2014 • Filed under: Economy, Ecuador

Eluniverso.com reported Ecuador is on the road of becoming the first country in the world to create an electronic coin that will be issued and distributed by the Central Bank and who will be using the cellular network; definitely a bold move that analysts suspect that it may create the conditions for a possible devaluation or de-dollarization of the economy.

The virtual currency, that Central Bank officials say they hope to begin to circulate in December, still does not have a name and they said that the amount of money that is issued will depend on demand.

“Instead of having a payment system based on physical species (notes or coins) that require logistics cost, we take advantage of the existing infrastructure and reduce transaction costs”, the Deputy Manager of the Central Bank, Gustavo Solórzano, told The Associated Press. “This will be money that flows through the cellular network.”

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Why the Ecuador promotes the use of electronic money?

Electronic money will begin to be used in December according to the authorities and it is intended to cover the monetary needs of 2.8 million people from the poorest strata of the population, who are not in the formal economy, but which however regularly used cellular phones.

Virtual money will have a 1-1 with the dollar parity e initially may only be used through the phone but it could later be extended to other technology platforms, officials said.

According to the British chain, Professor Lam, far from get rid of the dollar, the intention of the Government of Ecuador is rather in giving himself “a license to create money and finance spending”.

“My impression is that the Government is running out of money and with the dollar, economy the only way which can find financing for expenditures is with this intelligent way, to introduce a virtual currency that can be controlled”, says.

According to the BBC report, analysts warn that one of the risks is inflation: “with making money hand machine, the Government could succumb to the temptation to put it to”print”more – whether electronic impressions-. That is an evil which in the past has affected in a particular way to the economies of Latin America.” Read Article

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