In December 2014, Ecuador will introduce its very own digital currency. Backed 100% by government and regulated by the central bank, this digital currency – which is yet to be named – will be the first centralized national currency in the world to function digitally, and be accessed using a mobile device. This means no bills, no coins and no ATMs, just a mobile device which goes with people everywhere they go and is accessible at any time. Ecuadorian President: Rafael Correa, claims that the objective of the digital currency is to help the 2.8 million (40%) of the population – who cannot afford traditional banking or financial services – gain access to the means of obtaining, storing and transacting money that they otherwise would be denied of.
Elsewhere around the world we see shining examples of the potential for empowerment given to people who have access to a mobile phone – especially in the developing world. One example is m-Pesa, the mobile money wallet, which has been a phenomenal success across Africa as a platform enabling people to make micro-payments and transact with one another despite the persistent challenges faced with in these low-income regions (e.g. lack of formal infrastructure and high cost of transportation).
Being different from the m-Pesa service, in that Ecuador’s digital currency will be its own unit of value controlled by the central bank, this plan for a national digital currency has caught the attention of economists and the like around the globe not merely because it is the first of its kind, but because its possible success as a new model of currency might spell out the future path for other nations of the world to follow.
To put this plan all into perspective, consider the fact that Ecuador has been using the US Dollar as its official currency since 2000 (following its banking crisis in 1999), and now plans to make its digital currency circulate alongside the dollar. Some predict this as a move towards abandoning its dependency on the US dollar all together, which doomsayers say spells trouble for the future credibility of the dollar, and bolsters the arguments for the credibility of digital currencies (noting the infamous success of Bitcoin – the cryptocurrency which is being used in certain developed markets, like the United States, Europe and Japan).
But Ecuador’s digital currency will not be like Bitcoin – in fact the latter has actually been banned in Ecuador as well as in other countries on the grounds of its volatile nature. The main difference between the two is that Bitcoin is open-source, decentralized and is not backed by any authority – meaning that no-one owns or regulates the network of online money transfers. Whereas Ecuador’s digital currency will be centralized and for each unit of currency there will correspond an actual dollar in the Bank of Ecuador. Both models have their virtues, as well as their vices, but both represent ambitious new strides into the digital future with a mind of making access to finance and exchange more democratic and affordable.
Until its launch in December, we will have to wait to see whether this plan will be a success; and only then can we judge whether it really has the promise to empower and better the lives of ordinary people. From our South African context it will be of particular significance to take note of this moment in time where we see around us the discovery of new methods of exchange as the boundaries between the real and digital become blurred by the advances in mobile communication – especially as the site of commerce grows more and more into the realm of the digital.
Cities have always been centres of commerce; and they are the spaces where exchange between people finds its fullest expression.
It is important for the study of our cities that we consider these developments in technology and currency; as it will show by way of examination that when we look back at any point in our history we find that at each new form of currency that comes into being we find a particular stage of technological development that supports the relations of exchange of these units of value. And, there is a lot to be learned from studying the way that people use technology to facilitate commerce. Let’s take Ecuador’s centralized digital currency as a point of reference.
Cities have always been centres of commerce; and they are the spaces where exchange between people finds its fullest expression. At the core of the development of all commerce lies currency, or in other words: the medium of exchange that people use to buy and sell things with others. It is the drive to access currency in its various shapes and forms throughout history (from the use of shells and cattle through to the circulation of coins, paper money and today’s electronic transfers) that has gradually brought about the great societal shift from the rural and agrarian economy to the urban and modernised one.
In today’s globalized world, the ways in which exchange takes place happens not only in physical space, but also in the digital – and now mobile – spaces, which we access using our desktop PC’s or mobile phones. The true power behind mobile communication is their ability to bypass the restrictions of time and place posed by certain geographic, infrastructural or other social circumstances; in effect giving anyone the ability to communicate with someone else wherever they are, and perform functions that would otherwise require them to be present in some actual demarcated space.
The ease, convenience and cost-effectiveness experienced by anyone who has ever done internet banking compared to physically having to travel to a bank and waiting in line is an evident example of the benefits given to people through the use of digital/mobile technology. And though we still come across the perennial question of access (in this instance the access to currency and now access to a mobile device) we see here, perhaps through the example of Ecuador’s digital currency, a noteworthy convergence between the two.
If we see it from the point of view that mobile devices are becoming more affordable due to their lowering cost price, and that through the strategic use of these devices and services (their applications and supporting ecosystems which make them viable tools of making money and therefore of earning a livelihood), people from very different parts of the world are better able to participate effectively and efficiently in their economy; what we find is a unique moment in time where the question of access is perhaps on a path towards resolution.
This statement may seem somewhat idealistic, but in a sense its logic is quite simple: with mobile devices being tools for obtaining currency or a livelihood, and that they themselves are becoming more affordable to ordinary people, we see the future promise that any and all persons will be equipped to participate in local industries and from there become integrated into the global economy. This is more likely to become a reality when mobile penetration reaches further into the great majority of the global population.
Looking ahead, we see that we live in an era of mobility where people around the world are becoming more and more connected and societies more empowered through the adoption and integration of mobile devices into our everyday lives and ways of doing things. At the end of this year there will be 7.3 billion active mobile phones around the world – that’s roughly more than the total population of the earth. Of this more than 3.4 billion will be unique connections – meaning that they correspond with one actual user (and notably 1.75 billion will be ‘smartphones’, able connect to the internet). This means that half the world’s population will have access to a mobile device, something which has never before been possible.
But note that this is not a story of increasing penetration of mobiles for only the rich and more developed nations. In fact the growth rate of connections in these regions is minuscule when compared with the rate of growth in the developing areas of Southern Asia, Latin America, and Sub-Saharan Africa (which now has the fastest growing markets than any other region in the world, standing at 18% growth per annum over the last five years).
When we take all this into account we see more than just what Thomas Friedman said when he claimed that the world in the twenty-first century is flat; we see what former CEO of Google, Eric Schmidt called the new digital age where the new powers of the Post-American world, as explained by Fareed Zakaria, will come to hold fundamental positions in the reshaping of our futures.