Ecuador is on track to become the first country in the world to launch a government-backed virtual currency. The as-yet named currency is expected to launch in December alongside the country's existing currency, the U.S. dollar, which was officially adopted in 2000 following a crippling banking crisis.
Technical details remain unknown at this hour although Central Bank officials say it won't be like Bitcoin.
Deputy director Gustavo Solorzano said the virtual currency would be backed by liquid assets and will allow users to make and receive payments for a small fee using their mobile phones. Its use will be voluntary and according to the law, it can't be used to pay public employees or state contractors.
The idea is to give the 2.8 million people of Ecuador that cannot afford traditional banking a way to send and receive payments in a more affordable way.
Officials added that the amount of virtual currency created will depend primarily on demand.
Given the recent rise in popularity of cryptocoins, it was really only a matter of time before someone decided to create a government-backed version. It's far too early to know if Ecuador's virtual currency will be a success but as you can imagine, there are several people opposed to the idea.
Nathalie Reinelt, an emerging payments analyst with the U.S.-based Aite Group, told the Associated Press that she doesn't understand any other motivation for creating such a currency than to allow Ecuador to increase its money supply and ultimately devalue its U.S. dollar holdings. Others believe it could be the first step in abandoning the U.S. dollar completely.