In Ecuador, bitcoin is considered a high-risk digital currency

International experts convened by FLAR analyzed the initiatives of central banks in the region in the issuance of digital currencies

The decision of the President of El Salvador, Nayib Bukele, to promote in that dollarized economy the use of the digital currency bitcoin as a legal tender opens the debate on what these cryptocurrencies are and the viability in the various economies.

Marcos López, delegate of President Guillermo Lasso to the Monetary and Financial Policy Regulation Board, considered thatmust make a very clear separation on the understanding of cryptocurrencies,which is a general term for digital currencies. Within these can be all types of electronic payment means and on the other the type of cryptocurrency bitcoin. Regarding means of payment in general, according to López, central banks must begin to prepare for this new reality. This can accelerate the economic pace, he said.

On the other hand, on the bitcoin that is born from the algorithms generated by a computer, he considered that they continue to be a high-risk financial asset. He commented that this is not, in his opinion, an easily accessible and user-friendly currency.

Regarding the decision of the Executive of El Salvador,known these days,represents taking a risk by allowing a duality of official tender currenciesl in circulation. This subjects the economy to a permanent concern of the relationship between these two currencies coexisting in the same country.

In 2018, the Central Bank of Ecuador clarified to Ecuadorians that cryptocurrencies (such as bitcoin) are not an authorized means of payment in the country and they do not have support, since they sustain their value in speculation. They are not controlled, supervised or regulated by any entity in Ecuador., which is why they “represent a financial risk”. This means that the use of cryptocurrencies and the problems that may arise from their speculative nature are the sole responsibility of those who decide to adopt it.

The Latin American Reserve Fund (FLAR) meta few days ago, in the session ofCartagena Talks,to experts from the global economic field to analyze how central bank digital currencies (CBDCs), also known as cryptocurrencies, are increasingly relevant worldwide. According to what was explained by experts convened by FLAR,Cash as we know it creates disadvantages in digital business models and the pandemic has been a catalyst in accelerating the use of cryptocurrencies throughout the world.

The cryptocurrencies that the FLAR talks about, which are digital currencies issued by central banks, are not bitcoins, which are also digital, but not issued by central banks.

John Kiff, a former senior financial adviser at the International Monetary Fund, told the forum that since 2018 he began tracking a dozen countries that showed interest in what was still a new option at the time. Now, the number of central banks that have made progress with CBDCs reaches 80%, according to the Bank for International Settlements, and even launched pilots, it rises to 50%, which is not a lower number.

There are cases like Bahamas that already launched itssand dollar, while Jamaica will do so this month, he said. In order not to leave the hemisphere, both Uruguay and Ecuador completed their trials with businesses and people of flesh and blood. Elsewhere, China, Canada or Russia have taken steps in the same direction.

Indeed, in the case ofEcuador, there was an attempt to manageof electronic money by the ECB, which did not prosper. Then the entitiesPrivate financial institutions sought to push the electronic wallet, but this initiative has not finished taking off either.