We’ve argued enthusiastically for the introduction of state e-money before.
But we overlooked the likelihood that it might first be adopted by countries like Ecuador as a means of getting out of their dollar bind (via Bloomberg):
Ecuador’s congress approved a new law today that allows the government to create its own parallel currency for use in local transactions as the government struggles to meet spending commitments.
Congress voted 91-22 to approve President Rafael Correa’s proposal to change the South American nation’s monetary and financial laws, allowing payments in “electronic money” and giving presidential appointees the power to decide who gets loans and how lenders invest their reserves.
The bill now goes to Correa for his signature or veto. As a current-account deficit drains dollars from the economy, making it harder for Correa to fund a burgeoning budget gap, a new currency could be used to meet government payments, said Jaime Carrera, a former deputy finance minister and director of the Quito-based Fiscal Policy Observatory. It could also lose its value quickly if not backed by the central bank, he said.