Dollarization brought great benefits to the Ecuadorian people, as Steve Hanke (who 14 years ago was the chief intellectual architect of Ecuador’s switch to the dollar) points out,
Ecuadorians know that dollarization has allowed them to import a vital element of the rule of law — one that protects them from the grabbing hand of the State. That’s why recent polling results show that dollarization is embraced by 85% of the population.
Prof. Hanke also knows that going off the dollar will have dire consequences for Ecuador’s economy:
“If you go off, the fiscal deficit gets bigger, the level of debt gets bigger, inflation goes up and economic growth goes down. All the economic indicators just go south.”
So pres. Rafael Correa is attempting to de-dollarize, but not blatantly. How so?
Ecuador’s e-money initiative, which kicked off earlier this year after the country outlawed bitcoin, is about to see wider institutional involvement following a government directive.
The country’s banks were ordered late last month to adopt the payment system within the next year, according to a report by Pan-Am Post’s Belén Marty. The pace at which the banks are required to add support for the initiative, which is a digital representation of the US dollar – Ecuador’s official currency – depends on their size.
So it’s not even bit-coin, but it’s compulsory:
The nation’s central bank has given them 360 days to get on board, with a mandate inResolution 064-2015-M, released on May 25 in the official register.
. . .
The resolution gives a sweeping and vague definition of “macroagents” for adoption: “companies, organizations, and public or private institutions; financial institutions of the popular and cooperative system; that maintain a network of establishments available for clients and are capable of acquiring mobile money, distributing it, or converting it into varieties of money.”
Additionally, the Central Bank of Ecuador (BCE)’s crypto-currency transactions carry no privacy.
The dollar is taken out of the picture, and protection from “the grabbing hand of the State” is erased. Hasta la vista, baby!