Ecuadorian Government Adopts Virtual Money

To get things straight immediately, Ecuador isn't making Bitcoin its official currency. In fact, the cryptocurrency, which is just one form of such digital currency, is banned in the country. Instead, Ecuador will be implementing its own electronic money system, formally known as "Sistema de Dinero Electrónico". The digital payment system, according to government officials, will simply be an addition to its own US dollar-based physical money system, but some experts seem to think that the move might have other motives as well.

Ecuador won't be the only country that uses digital money. Sweden has a widely-used system too, but the difference is that Ecuador's will be the first one that is run by the government itself. This alone, perhaps sounds a few alarms in people's heads. Naturally, officials are ensuring that everything is still status quo and the the electronic money will only serve to supplement the existing system.

Some, however, argue that while that may be true initially, in the long run Ecuador might have bigger fish to fry. In particular, this new system is being seen as a way for the country to de-dollarize its economy. In 2000, it switched away from its own currency and adopted the US dollar. In public, government officials say that the dollar system has been good for the economy. But some have also been reported to subtly refer to frustrations with being so dependent on the dollar.

In addition, some of the government's moves also hint at a grander scheme. It has banned Bitcoin and other competing e-money solutions in the country. Add that to the fact that the electronic money system is government controlled, you can already sense some plans of monopoly over the digital currency and to profit from it. This would, perhaps, go contrary to the system's stated goals of helping the poor.

SOURCE: CNBC