Ecuador’s e-Money Initiative Outlaws Bitcoin, Makes Mandatory for Banks to Follow Dictate
In July 2014, the National Assembly of Ecuador banned Bitcoin and decentralized digital currencies while establishing guidelines for the creation of a new, state-run currency, not a lot of people had thought the country would move so fast on the initiative. However, now Ecuador’s e-money initiative is about to see wider institutional involvement following a government directive.
In a mandate in Resolution 064-2015-M, released on May 25 in the official register, the central bank of Ecuador gives the banks 360 days to get on board. With this, President Rafael Correa’s government is pushing forward with its own brand of centralized digital currency. The directive says that Ecuadorean banks that possess $1b or more in assets have 120 days to integrate. Similarly, the banks with less than $150m have 360 days as of 26th May to add support. Banks with an amount of assets that fall between those amounts have 150 days to do so.
Earlier the last year, the National Assembly had issued a statement declaring that the new electronic money would offer benefits to both the under-banked and the broader economy. Interestingly, on one hand, the government is pro-cryptocurrency; on the other hand, it bans Bitcoin – this has not gone well with the Bitcoin supporters in the country.
Then the National Assembly had said:
“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.”
The latest document released and signed by the Economic Policy Minister Patricio River Yánez makes it mandatory that all entities of the public, private, and cooperative financial sectors are obliged to incorporate themselves as macro agents within the Electronic Currency System. It also makes it mandatory for financial institutions to provide an electronic tender option for all the services that they currently offer and those that they will subsequently offer. Nonetheless, the guidelines also mention that each bank will thus have to open an account with the government-run Electronic Currency System.
Reactions from Various Sections Regarding Bitcoin Ban
The superintendent of Ecuador’s Banking and Securities body, Pedro Solines Chacón says Bitcoin has no regulating or supervisory body, carries the risk of money laundering and financing terrorism. The latest decision by the Ecuadorean government to issue directive on the digital currency is receiving mixed reactions. Whereas some support it calling it a progressive measure, others suspect the capabilities of the government to manage it. Interestingly, the government’s digital money is being considered good for the country as the USD is the official currency for over a decade; however, there is always some trouble for the national economy when value of the USD falls.
A major concern, however, is privacy and lack of infrastructure in the country. Skeptics claim that in the country where credit card acceptance is very rare, and people have to wait in queues for hours to use ATMs, the success of the digital currency is questionable. Similarly, the absence of privacy in the BCE’s electronic money system is far more worrying than anything else as with the electronic currency all transactions are linked to the identity of the person.
Do you think it is end of the road for Bitcoin in Ecuador? Will the government be able to run digital currency with a lot of infrastructure issues? Let us know in the comment section.
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