first digital currency tied to a state bank

Ecuador’s ‘digital currency’ explained 40% of Ecuadorian adults don’t have a bank account, but is their new ‘currency’ more about escaping the US dollar?

Just a quick review. Ecuador's currency collapsed in the mid 1990's spurred on by the collapse of fishing economy because of a severe El Nino (which drives the fish too deep to be easily caught).

The largest banknotes were worth US$2. Rather than issue new currency with three zeros removed (like many nations), they officially adopted the US dollar in the year 2000 as their currency. They do make their own coins, including a dollar coin which is very popular. Understandably the dollar coin would be useful for a county whose GDP is $16 per day.


While the switch in 2000 was seen as necessary in order to allow businessmen to be able to borrow money,and to encourage investment in Ecuador, most adults only make the most primal uses of money (as a way to shop).

The digital currency is being touted as way to deal with the mundane aspects of currency (making change, guarding against theft, reducing the need to renew old banknots, making payroll easier), etc. But it is still denominated in US dollars which allows for the possibility of it circulating outside of the country.

Although the digital currency must be backed by a physical US dollar in the central bank there is always the possibility of the central bank "printing money". As we know, "printing money" is only permitted as quantitative easements by major powers.

---------------------
El Salvador has also adopted the US dollar as it's currency, but for an entirely different reason that Ecuador. The currency was stable in El Salvador, but as the primary source of income was money sent home from people working in the USA, it was actually more expensive for Ecuador to produce their own currency than to use the US dollar.

===============
Sweden is now in it's sixth year of reducing the amount of physical currency. The average value of notes in circulation (SEK billion) was 100 billion SEK in 2009 down to 75 billion SEk in 2014 (US$9.25 billion). That is less than US$1000 per capita. The thousand kroner banknotes (=US$123) has been reduced to 6.16 million notes in circulation. The 500 kronor banknote represents the bulk of the value of banknotes in circulation.

Although it might make sense for Sweden to eliminate their physical currency at this point, they are going through with plans to issue a new series of banknotes and coins. They are introducing a 200 kroner banknote = US$24.67 which we would find more convenient for ATMs. Currently the 100 and 500 koronor are existing denominations. Presumably the 500 kronor banknote=US$61.68 is the choice for the relatively small number of ATMs in Sweden.

---------------------
Britain steadily increases the number of £50 banknotes (=US$75) in circulation and is now up to ​221 million notes (double the number of a decade ago). Although that is still tiny compared to the Dollar, Yen or Euro the trend is still upwards.

The Stock of Notes in Circulation at end-February 2014 in the UK was​ £60.2 billion for a population of 63 million. It is tiny compared to the Swiss issuing 60 billion francs for a population of 8 million. The Swiss have the highest value of physical currency issued per capita of any nation in the world except possibly the Sultanate of Brunei (which doesn't publish it's numbers).