Ecuador on 29 August 2014 unveiled plans to issue world’s first digital currency. The currency will be issued by Central Bank of Ecuador. The new currency was approved by Ecuador's National Assembly in July 2014.
The electronic money, as yet unnamed, will start circulating in December 2014. The new money will be used alongside the existing currency in Ecuador, the US dollar. Ecuador introduced the US dollar as its currency after a crippling bank crisis in 2000.
According to plans, the new digital currency will help 2.8 million Ecuadoreans, 40 per cent of participants in the economy, who cannot afford traditional banking. It will also help poorer Ecuadoreans make and receive payments using mobile phone technology which will be similar to the mobile payments schemes run in African nations by private players.
Analysts say the introduction of the electronic currency could be used to increase the money supply and devalue US dollar holdings - a first step towards abandoning the US dollar.
Bitcoin vis-a-vis New Digital Currency
The new digital currency is not like Bitcoin, whose advantage is in its technical underpinnings. That is only a limited amount of Bitcoin can be minted. Without that safeguard, economists have warned, a government could theoretically create as much as it wants, risking inflation.
It is believed that the digital currency would not be a crypto-currency like Bitcoin. The amount of the new currency created would depend on demand. Bitcoin (a global digital currency) has faced huge challenges to get people around the world to use it, and that is a worldwide movement with thousands of developers working on it.
If you have any Question/Point on the above information, please ask/discuss it in the Current Affairs Group
When: 29 August 2014