Ecuador Turning to Virtual Currency After Oil Loans
Ecuador Turning to Virtual Currency After Oil Loans
By Nathan Gill
Aug 11, 2014 5:12 PM CT
(Corrects headline to remove reference to dollar saving in story originally published Aug. 5. Attributes speculation that government would use the new currency to pay bills in first paragraph. Clarifies in third paragraph that people can reject government payments in the new currency and adds government’s explanation of its advantages in seventh paragraph.)
After mortgaging most of Ecuador’s oil and gold to finance spending, President Rafael Correa is planning to create a virtual currency that financial professionals say his government could use to pay bills.
Congress last month approved legislation to start a digital currency for use alongside the U.S. dollar, the official tender in Ecuador. Once signed into law, the country will begin using the as-yet-unnamed currency as soon as October. A monetary authority will be established to regulate the money, which will be backed by “liquid assets.”
Less than six years after repudiating $3.2 billion of its dollar-denominated debt, Ecuador has dwindling oil reserves, with current-account deficits that are draining dollars from the economy and financing needs at a record. While Ecuador hasn’t said it plans to use the currency to fund spending and the legislation states that people can refuse to accept it as payment, Landesbank Berlin Investments says Correa may seek to use it to compensate workers and contractors and conserve hard cash.
More:
http://www.bloomberg.com/news/2014-08-11/ecuador-turning-to-virtual-currency-after-oil-loans-correct-.html
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