Ecuador plans to create official digital currency: Report

Ecuador is on its way to signing in a law that would see the creation of a new government-backed digital currency and simultaneously ban the use of other cryptocurrencies in the country.

Ecuadorian President Rafael Correa is planning to sign into law a bill that would see the country create a government-backed cryptocurrency in order to help pay the nation's bills, according to a report by Bloomberg.

Ecuador does not have a local currency, as the country adopted the US dollar as its official currency in 2000. However, if the plans for the new as-yet-unnamed cryptocurrency go ahead, it would be used alongside the US dollar, and controlled by the country's central bank.

Under the proposal, the digital currency would be backed by a liquid asset, most likely dollars or another global currency.

According to a report on 23 July by Ecuadorian news outlet PanAm Post, debate over the reform started on 22 July, after Correa presented the original version on June 25.

The law reform for the creation of a digital currency and financial regulation system controlled by the executive was presented to the country's Congress as an "urgent matter" by Correa.

At the time, Minister for Economics Policy Patricio Rivera said: "With this new code we hope the banking industry will collaborate with the people, and not the people for the banking industry, which is what has been happening since the 1990s".

The PanAm Post report said the bill stipulates that the Monetary and Financial Regulatory Committee will regulate the digital currency, while the Central Bank will handle its implementation, development, and evolution.

Meanwhile, the Bitcoin Community of Ecuador has raised concerns over the move, sending a statement to the Assembly, saying that the proposed legislation's threat to the privacy of Ecuadorians and their freedom to use decentralised cryptocurrencies should be taken into consideration by lawmakers.

However, on 25 July, the bill was passed, along with an amendment that makes the use of bitcoin and other cryptocurrencies illegal in the country. However, at the time of writing, the bill was yet to be signed into law by Correa.

Other governments around the world have viewed the emerging cryptocurrency market with an ambivalent eye. In July, the European Banking Authority recommended that Bitcoin be avoided until regulatory systems are out into place.

In May, China's largest bank, ICBC, banned activities related to trading in Bitcoin, joining at least another 10 banks in the country participating in a government crackdown on virtual currencies.

The collapse earlier this year of the once-dominant Japanese Bitcoin exchange Mt. Gox, after it lost approximately 850,000 Bitcoins to hackers, has thrown into question the reliability of cryptocurrencies.