The national assembly of Ecuador (the law-making branch of the nation) has voted to ban Bitcoin. The move comes after Bolivia, the only other South American nation to issue specific cryptocurrency regulation, chose to ban Bitcoin last month. The bill explicitly bans companies and individuals operating in Ecuador from participating in “emission, production, initiation, falsifications, or any other type of [digital currency] simulation, and its circulation through any channel or way of representation.” The bill executing the ban was voted in favor of 91-22, and along with banning cryptocurrencies, also called for the creation of a government-sponsored Ecuadorian electronic currency, which will be backed by the assets of the central bank of Ecuador, and managed by the national assembly, in cooperation with the central bank of Ecuador.
The Ecuadorian government made a statement following the final vote, suggesting that digital currencies would help stimulate the economy and support the unbanked population of Ecuador.
The statement reads:
“Electronic money will stimulate the economy, it will be possible to attract more Ecuadorian citizens, especially those who do not have checking or savings accounts and credit cards alone. The electronic currency will be backed by the assets of the Central Bank of Ecuador.”
I would humbly suggest that, if the national assembly were interested in the welfare of the economy and the unbanked of Ecuador, they might have chosen not to ban Bitcoin. In principle, the ban is motivated by a desire to keep the economy safe from the unpredictable winds of the Bitcoin industry, a security that might be more comforting if the government of Ecuador hadn’t completely destroyed its economy just fourteen years ago. The new electronic currency will be competing with the US dollar, which became the official currency of Ecuador following the collapse of Ecuador’s own currency, the sucre, in January of 2000. Putting faith in the new digital currency requires trusting that the government of Ecuador will resist the same money-printing temptations that they have succumbed to in the past.
The ban will affect a number of companies, including BigPagos, a payment processor that had raised $600,000 to begin work in Ecuador. Prior to the vote, the Bitcoin community of Ecuador wrote an open letter to the government, asking them to be responsible in their creation of a digital currency, and asking them not to ban existing cryptocurrencies. The letter stated:
“Ecuador, as a pioneer in the creation of a digital state-run currency, must use methodologies that respect fundamental rights. The digital-currency system must be verifiable, and its code must be published as free software, to ensure the system’s privacy through algorithms.”
The bill, having been successfully voted on, will go before the president’s desk, and is expected to be voted into law unchanged in the coming days.