Is Ecuador’s Digital Currency System Functioning Well?

Ecuador’s digital money system kicked off in December 2014 under then-President Rafael Correa. // File Photo: Ecuadorean Government.

Ecuador is reforming its digital currency system, launched three years ago, in part by removing the country’s central bank from the process. Since its rollout, has the digital currency achieved its expected outcomes, such as helping the poor and creating efficiencies? What has been the impact of Ecuador’s digital currency on the economy and on the country’s banking system? How are banks in Ecuador and elsewhere adapting to the presence of digital currencies? How does Ecuador’s digital currency compare to Bitcoin, which is used in Ecuador despite a ban signed by former President Rafael Correa?

Oscar Bazoberry, CEO of World Network of Cooperatives, a World Data Affiliate: “Ecuador’s digital currency experiment has gone through three phases so far: great idea, poor implementation and a new beginning. It is a great idea for a country to have a well-implemented digital currency, and I think it is the way of the future. Ecuador’s initial digital currency platform was launched in December 2014 by its central bank. Initially the central bank was the only authorized entity to create and operate the digital accounts, as well as to control the value of its digital currency (in theory pegged 100 percent to the dollar). The platform supports a USSD mobile end-user interface. This implementation has not prospered, due to the private financial sector’s lack of confidence in the government and the great limitations of its platform and model. The newly elected Ecuadorean government has decentralized the use of digital currency, where now private banks and credit unions may have their own platforms to operate alongside with the central bank one. This is an exciting move by the government, but there are a few key recommendations to ensure long-term success…”

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