Ecuador set to be first country to issue its own digital currency

Ecuador is planning to create the world's first government-issued digital currency, with some analysts saying it may be a first step towards abandoning the country's existing currency, the US dollar - which the government cannot control.

The virtual currency, which central bank officials say they expect will start circulating in December, does not yet have a name. Officials would not disclose technical details of the currency, but said it would not be like bitcoin. The amount of the new currency created would depend on demand.

Deputy bank director Gustavo Solorzano said the currency was to exist in tandem with the greenback and, by law, be backed by "liquid assets". It would be geared towards the 2.8 million Ecuadoreans - 40 per cent of participants in the economy - too poor to use banking, officials say.

They would initially be able to use the currency to make and receive payments using cellphones, said Solorzano, at minimal cost. Such payment schemes are already popular in African nations Kenya and Tanzania, where they are privately run.

The new currency was approved, and stateless crypto-currencies such as bitcoin simultaneously banned, by Ecuador's National Assembly last month in a new law.

President Rafael Correa has said the project's only problem was that it had taken this long, defending it against "pseudo-analysts who have appeared in the media trying to smear [it]". He denied any plan to replace the US dollar, which Ecuador set as its currency in 2000 after a crippling banking crisis.

The official in charge of the new currency, Fausto Valencia, said the software was already used in Paraguay by cellphone firms.