In an attempt to control the country's currency, Ecuador has developed plans to create the world's first government-issued digital currency, according to the Associated Press.
No technical details have been released about the new digital currency, but officials say it will not be like Bitcoin, which is an online payment system. The amount of the digital currency that will be created will largely depend on its demand.
According to deputy Director Gustavo Solorzano, the digital currency will be backed by liquid assets by law, according to Bloomberg News.
Solorzano said the virtual currency is aimed towards the 2.8 million Ecuadoreans that are too poor to afford traditional banking, which account for almost 40 percent of the economy's contributors.
Ecuador's National Assembly approved the digital currency plan last month, while stateless currencies like Bitcoin were banned.
But how will it work?
Cellphone users will be able to make and receive payments on their cellular devices at minimal costs, Solorzano said. And, according to Central Bank president, Diego Martinez, it will also be easier and more hygienic than using dollar bills, according to Bloomberg News.
The country's humid conditions and lack of wallets have caused dollar bills to last only about two to three months, instead of normally lasting 14 to 18 months, according to News Max. What is more, counterfeit dollars have created a problem for the government.
According to Ecuadorean news outlet, the PanAm Post, the digital currency will be regulated by the Monetary and Financial Regulatory Committee and Central Bank will take care of its development and implementation, ZD Net reported.
Analysts believe the move comes because the government cannot control the current currency, which has been the U.S. dollar since 2000, and will likely be abandoning it.
However, President Rafael Correa said this not the case and he has stated there aren't any plans to replace the U.S. dollar.
But not everyone is convinced of the President's motives.
Take, for example, Nathalie Reinhelt, an emerging payments analyst with Aite Group. According to her, the Ecuadorean government is only creating the digital currency in order to increase its money supply and devalue its U.S. dollar holdings, AP reported.
Lawmaker Ramiro Aguilar, who is against digital currency, said the reasons behind the government's motivation comes from Ecuador having "a serious fiscal liquidity problem. It needs money ... It doesn't mint money. It has no control over what circulates."
Ecuador is currently facing $11 billion in debt, according to AP, though its economic growth surpassed Brazil's in 2013, according to Cryptocoins News.
The law states that the digital "currency will be voluntary and won't be used to pay public employees or state contractors," according to AP.
The digital currency does not have a name yet, but Central Bank officials say it should begin circulating in December.
