Although the government needs their support, Ecuador’s private banks say they lack confidence in the Central Bank’s electronic money system.
Julio José Prado, president of the Association of Private Banks (ABPE), says bankers have two major objections: the administration of the system by Ecuador’s Central Bank (BCE) and language added to recent legislation that may leave e-money unsecured.
“We cannot at this point support any financial program that is administered by the BCE since we have no confidence that it is secure,” Prado said.
He adds that part of the lack of confidence is because bankers cannot be certain that e-money will be backed, dollar-for-dollar, with hard cash. “Language added to the Solidarity Act (that recently raised the VAT rate to 14% from 12%) suggests that the digital money will backed only by government assets, not by real dollars,” he said. “This is not acceptable to us.”
Since it became operational last year, the electronic money system was been met with apathy by the public. While the government expected that Ecuadorians would open 500,000 accounts by the end of 2015, it only boasts 66,000 as of the end of April 2016.
Another obstacle for the system is a lack of businesses who accept electronic money transactions. Many of those that do say they get few requests to use it.
Eager to encourage participation in the system, the National Assembly included a 4% discount on the VAT for electronic money purchases in the recently passed Solidarity Act. President Rafael Correa has yet to sign the legislation.
The electronic money system would operate on cell phones.