Earlier this year, the South American nation of Ecuador became the first country in the world to have its own official digital currency. Ecuador abandoned the use of its national currency ‘sucre‘ in 2000 amidst the banking crisis to adopt the US dollar as the currency for transaction. Since then the country has been using dollars as the instrument of payment. The country, led by its President Rafael Correa since 2007 had announced in mid-2014 the plan of going digital with a government backed digital currency.
The new digital currency system is set up to be used alongside the conventional US Dollar (Ecuador may gradually replace US dollar with digital currency). It seems like Ecuador decided to make use of a bitcoin like technology to create this digital currency so that it can benefit from all the goodness that comes associated with it.
The Ecuadorian digital dollar, now called the Electronic Money System (EMS) was announced while keeping those who can’t afford traditional banking in mind. Apart from making the country’s monetary system simplified and more efficient, it also allows poor Ecuadorian citizens to receive and send payments with their mobile phones, similar to M-Pesa and other services widely adopted in African nations. The Central Bank foresees EMS being used in the future to pay government bureaucrats in a “hygienic manner”, minimizing the possibility of corruption and graft.
EMS implementation is designed to happen in three distinct phases. The first phase was live from 24 December 2014 to 25 February 2015. During this phase, people were allowed to create EMS accounts and make changes to their login credentials. In order to register to the service, all one needs is a mobile phone, proof of identity and proof of having voted in the previous elections (to ensure only Ecuador’s citizens benefit from it). The EMS adoption is currently in the second phase, allowing users to perform transactions like depositing, sending and receiving money to and from mobile wallet. Third phase is likely to set in sometime during the end of this year where features for paying utility bills and taxes to the government will be included to EMS.
The EMS has received mixed response from the citizens. By the end of first phase, the system received only 8,000 registrations. Even though people are curious about the new system, most of them are waiting for the system to be completely implemented before they can opt for it.
EMS will hold monopoly for digital currency in the Ecuadorian economy as the bill authorizing the implementation of Central Bank controlled digital currency bans other digital currencies including Bitcoin. For wider adoption of EMS, the government has to conduct educational programs across the country to make people understand the concept of digital currency, its advantages and the benefits of digital currency on the country’s economy and individuals’ living standards.
Ecuador has certainly set an example for rest of the world by becoming the first nation to adopt digital currency backed by the country’s Central Bank. It is just a matter of time before other nations follow suit.