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Ecuador launches new digital currency – but most residents know little about it


Quito, Ecuador — Sitting in the corner of a crowded Quito market behind a table piled high with ripe avocados, Karina Ubillus watches as a nearby stall-holder digs out a wad of crumpled dollar bills from a pouch at her waist and laboriously counts out the change to a customer who has just purchased some mangos.

Karina and her neighbour are both dressed in the turquoise and red dresses traditionally worn by Quichua indigenous women; both of them eke out a living in the country’s informal economy and neither has a bank account.

They – and the other traders in the market – are just the sort of people president Rafael Correa says will benefit most from Ecuador’s plan to become the first country in the world with a digital currency.

But in this corner of Quito, few have even heard of the new currency – and those who have are skeptical that it can work. “Digital money is a terrible idea for the markets” says Karina. “A lot of people here are illiterate and cash works just fine.”

The new system, which is officially set to launch on Thursday, will work much like mobile phone bank payments in other countries: users will be able to exchange hard cash for digital money which is stored in an electronic wallet on their phones.

As with other mobile payment programmes, text messages will allow users to make payments to other accounts, but what makes this plan different is that this is the first time a national government will have full control; everything from the creation of new units to securing the system against attack will be managed by the Central Bank of Ecuador.

“This is better than private options because our priority will be the users and not profit”, David Duque, Digital Money Analyst at the Central Bank of Ecuador told The Guardian. “Forty percent of Ecuador’s population does not have a bank account and we want to make it easier for the ‘unbanked’”.

So far, however, Duque’s enthusiasm has not been matched by ordinary Ecuadorians: customers have been able to create a digital account since December, but so far, said Duque, only 8,000 people have done so – in a nation of 15 million. “We have not yet launched a big promotional campaign”, he said.

If the launch goes according to plan, from Thursday, users will be able to walk into any participating bank and exchange their physical dollars for the equivalent amount in digital dollars and send or receive payments from other users.

Later in the year the government plans to begin accepting the currency for taxes and other bills. Taxi drivers and municipal buses also plan to accept the digital dollar in the coming months. “We expect 500,000 active users by the end of the year”, said Duque.

The bill which gave the Central Bank the authority to create digital dollars was passed last July, but most residents know very little about the new system. With scarce information to go on, opinion is strongly divided along party lines.

Rafael Correa, the small Andean nation’s president since 2007, has a fiercely loyal base of supporters who say he has improved the country’s infrastructure and increased political stability.

Correa, a champion of Ecuador’s digital dollar, has long criticized the country’s 2000 decision to abandon its own currency, the Sucre, and adopt the US dollar.

But an increasingly hostile opposition accuse Correa of authoritarianism and worry that some of the new reforms are thinly veiled power grabs. The bill that authorized the digital dollar also banned Bitcoin and other digital currencies.

“He just wants to print more money so he can have more power and spend money we don’t have”, university student Carolina Anas told The Guardian. “If he wanted to help us then why would they ban any competition?”

The Central Bank has repeatedly stated that each digital dollar will be backed by a physical dollar that the government will hold in reserve – and that this is not the first step toward Ecuador abandoning the dollar.

Selso Penafiel, 42, owns a small pizzeria and plans to accept the digital dollar. “The world is changing and we have to get in front of those changes”, he said. “Correa is a smart man and I have a lot of confidence in anything he supports”.

Jose Merino, 58, a worker at a Coco Cola bottling factory outside Quito shrugged when asked about the digital dollar. “It’s just an experiment for now. I’ll wait and see what other people think before I try it.”

This was first published in The Guardian

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