Ecuador’s Sistema de Dinero Electrónico (electronic money system, or EMS) is set to enter its next phase of launch in the coming days.
The initial phase saw Ecuador citizens opening accounts. The next phase will allow them to send money to each other via SMS, functioning almost like a government-run form of bKash or M-Pesa.
Last week, the Central Bank of Ecuador announced that it signed a deal with a 60,000-member taxi organization to accept the new digital money.
Diego Martinez, a delegate of the President of the Republic to the Board of Regulation and Monetary and Financial Policy, said that Ecuador law states explicitly that economic transactions must take place in US dollars. He told CNBC:
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“Electronic money is designed to operate and support the monetary scheme of dollarization.”
The stated rationale for the new system is to help make the monetary system more efficient. The government is reportedly trying to phase out and exchange its old notes of deteriorating value for new dollars, which Martinez estimates costs the economy over $3 million a year.
The hope is that the new system will help the poor, stimulate the economy and attract more citizens.
However, some remain skeptical over the government’s true intentions. The government has banned cryptocurrencies like bitcoin and blocked competing e-money systems. Thus, the government’s move to become the exclusive provider of mobile payments may be a signal of frustration over its dependence on the dollar. It has been speculated that the new system is really a means to eventually abandon the dollar, a claim officials have denied.