Ecuador’s exclusive electronic payment system: towards dedollarization?

After 15 years of making efforts to improve its monetary system, Ecuador is once again changing its payment transactions, now with the help of digital currencies.

The South American country’s new monetary system, which launched in its entirety last February, was the first government electronic payment system. Last December, Ecuador’s Sistema de Dinero Electrico allowed qualified users to set up their accounts.

The Ecuadorian government has taken this action to deal with the stumbled currency for the US dollar. The system is also designed to support the country’s monetary system based on dollars.

Among the advantages that this new monetary system offers is that it serves as a cost-saving mechanism for the government. In addition, economist Diego Martinez, the president’s delegate to the president’s Council for Regulation and Monetary and Financial Policy, said that in addition to helping the poor, mobile payments would reduce the amount the government would spend on exchanging old banknotes for US dollars. .

One of the few first steps Ecuador has taken is to try digital currency when paying fees for fees. Ecuador’s central bank signed a deal last February involving 60,000 members of e-money taxi companies. Following this initiative, consumers 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 consumers to pay for public services through mobile payments.

Ecuador’s new payment system does not require an internet connection in order to have successful transactions. They can also be redeemed as physical money and consumers will be able to make payments using their mobile phones and the value stored in their accounts.

On the other hand, even though the government has allowed the digital currency not to replace the existing payment system in their country, some professionals inside and outside Ecuador speculate that the move was taken by the government for other reasons. One of them is Mr. Lawrence White, a professor of economics at George Mason University. According to him, he finds it reasonable for Ecuador to provide an exclusive medium for mobile payments. He sees this step as Ecuador’s maneuver for dedollarization. He also explained that the government’s ban on bitcoin last July was proof that they had bigger plans and saw it as a potential move to exit the US currency.

Currently, the government still denies speculation that the digital currency will allow Ecuador’s central bank to issue new money that does not exactly match its US dollar reserves.

Whether this step aims at dedollarization or not, Ecuador has taken an important step in recognizing the benefits that the digital currency offers. This will certainly have a major impact on Ecuador’s economy, positively or negatively.