After 15 years of taking steps to improve its monetary system, Ecuador is changing its payment transactions again, now with the help of digital currencies.
The new monetary system of that South American country, which started working completely last February, was the first state electronic payment system. Last December, Ecuador’s Sistema de Dinero Electrico allowed qualified customers to open their accounts.
The Ecuadorian government has taken this action to address the faltering currency for the US dollar. The system is also designed to support the country’s dollar-based monetary system.
Among the benefits offered by this new monetary system is that it serves as a cost-saving mechanism for the government. Moreover, economist Diego Martinez, a delegate of the President of the Republic in the Committee on Regulation and Monetary and Financial Policy, said that in addition to helping the poor, mobile payments will reduce the amount the government will spend on exchanging old banknotes for US dollars. .
One of the first few steps Ecuador has taken is to test the digital currency in paying for taxi tickets. The Central Bank of Ecuador signed an agreement last February that includes 60,000 members of taxi organizations on accepting electronic money. Following this initiative, users will be able to choose services and pay via 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 payments.
The new Ecuadorian payment system does not require an internet connection in order to have successful transactions. It can also be used as physical money, and users will be able to make payments using their mobile phones and the value stored in their accounts.
On the other hand, even the government has confirmed that the digital currency is not aimed at replacing the existing payment system in their country, some professionals inside and outside Ecuador speculate that the government took this step for other reasons. One of them is Mr. Lawrence White, a professor of economics at George Mason University. According to him, he considered it reasonable for Ecuador to provide an exclusive medium for mobile payments. He sees this step as Ecuador’s maneuver towards dedollarization. He further explained that the government’s ban on bitcoin in July last year is proof that they have bigger plans and sees it as a potential move to get out of the US currency.
At the moment, the government still denies speculation that the digital currency will allow the Ecuadorian central bank to issue new money that is not equal to its reserves in US dollars.
Whether this step is aimed at dedollarization or not, Ecuador has taken a big step in recognizing the benefits that digital currency offers. This will certainly have a big impact on the Ecuadorian economy, positively or negatively.