Countries around the world consider their own digital currency

11 March, 2015

As attention surrounding bitcoin continues to grow, a number of countries around the world have begun to look into the possibility of launching their own digital currencies. Just two of those countries are Ecuador and the Czech Republic.

Last year, Ecuador announced plans to create what would become the first digital currency in the world to be actually issued by a central bank. Many experts believe that this could be a move by Ecuador to move away from the U.S. dollar, the currency the Central American adopted some fifteen years ago. In December, the Sistema de Dinero Electronico was launched and once the system becomes official, the 16 million citizens of Ecuador will be able to take advantage of the first state-operated electronic payment system. 1

It is worth noting that while other countries, including Sweden and Finland have allowed the widespread use of digital currencies, those systems are not actually state sponsored. By comparison, the Ecuadorian government has given the new electronic currency its full support. The government has insisted that the move is designed to support the current dollar-based system rather than replacing it. In order to make a transition that would replace the dollar-based system, it is likely that Ecuadorian law would need to be changed, as the current law states that all economic transactions must be conducted in U.S. dollars.

There could also be cost savings associated with the introduction of the new electronic currency. The country currently spends in excess of $3 million exchanging old currency notes for new notes. If citizens rely more on mobile payments, there could be conceivably less wear and tear on the country's currency.

Ecuador is not alone in adopting an online currency

Despite the surprising move, Ecuador is not the only country to express an interest in a digital currency system. The Czech Republic also recently launched what has been dubbed as the CzechCrownCoin in an effort to give online business a boost. Unlike in Ecuador, in the Czech Republic, the online currency was launched by a group of enthusiasts with media and broadcast backgrounds. The new cryptocurrency will serve as a local alternative to bitcoin and cash transactions. Based on litecoin, the new cryptocurrency will not be controlled a central authority.

Why exactly is it that so many countries are considering making the move to an online currency?

One of the most likely reasons that so countries are now expressing interest in an online currency is that they have seen the success of bitcoin as well as the way that it appeals to such a broad audience. While many people at first believed that a digital currency such as bitcoin would only appeal to individuals with an interest in tech, that has proven not to be the case. Bitcoin is rapidly become more and more mainstream with people from all walks of life adopting the digital currency in order to take advantage of the many benefits it offers.

Potential risks of non-bitcoin digital currencies

While Ecuador has taken the step of implementing a digital currency, the country has rejected other such currencies, including bitcoin. If there is a downside to Ecuador's new online currency is that there are no limits on the amount that can be minted, unlike with bitcoin. This can prove to be a significant risk, as it could lead to high inflation. Exactly whether that proves to be a concern remains to be seen. For now, citizens in countries such as Ecuador may find that with greater access to mobile phones, it is now much easier to benefit from the ability to store currency digitally on mobile phones and make online purchases.


1) Ecuador set to create state-backed digital currency... to ditch dollar?