Key question #1 : how is payment settlement going to take place? In the US and the vast majority of floating fx currency regimes(fiat money regimes), payment settlement occurs via credit/debits to/from reserve accounts at banks. Banks have accounts at the Federal Reserve which are used to settle payment amongst each other. By settling in reserves and allowing bank deposits to be merely denominated in reserves -US case- money supply is much more flexible.
Key Question #2: How will loans be made ? Will banks be able to make loans out of thin air as in the US and most of world or will loan creation be tied to reserves?
As it stands today, Ecuador's monetary regime looks like a gold standard fixed currency regime. This digitization change appears to be an attempt to eliminate cash transactions but maintain the dependency on dollar reserves which the Ecuadorian government cannot print and must be obtained via exports, which is hard. Golds standards died because of this inflexibility. My guess is this is a first step in returning to a sovereign currency but without saying so explicitly. If loans and settlement are based 100% on dollar reserves today maybe tomorrow they can remove the US Dollar reserve usage.
Key Question #2: How will loans be made ? Will banks be able to make loans out of thin air as in the US and most of world or will loan creation be tied to reserves?
As it stands today, Ecuador's monetary regime looks like a gold standard fixed currency regime. This digitization change appears to be an attempt to eliminate cash transactions but maintain the dependency on dollar reserves which the Ecuadorian government cannot print and must be obtained via exports, which is hard. Golds standards died because of this inflexibility. My guess is this is a first step in returning to a sovereign currency but without saying so explicitly. If loans and settlement are based 100% on dollar reserves today maybe tomorrow they can remove the US Dollar reserve usage.