EspañolWhile companies worldwide are embracing the rise of decentralized cryptocurrency bitcoin, Ecuadorian officials have chosen to make local banks adopt a home-grown state digital currency — whether they like it or not. The nation’s central bank has given them 360 days to get on board, with a mandate in Resolution 064-2015-M, released on May 25 in the official register.
The ruling, signed by Economic Policy Minister Patricio River Yánez, establishes that “all entities of the public, private, and cooperative financial sectors are obliged to incorporate themselves as macroagents within the Electronic Currency System.”
The document stipulates that financial institutions will have to provide an electronic tender option for “all the services that they currently offer and those that they will subsequently offer.” Each bank will thus have to open an account with the government-run Electronic Currency System.
Ecuadorian establishes the US dollar as the official currency, under the purview of the Central Bank of Ecuador (BCE). The digital currency will, therefore, be “equivalent and convertible to US dollars.”
The objective of the electronic system is, according to the resolution, “to seek efficiency in payment systems to promote and contribute to the economic stability of the country.”
César Robalino, president of the Ecuadorian Association of Private Banks, told Guayaquil-based newspaper El Universo that his organization has not yet opposed the electronic form of currency as a “payment method exclusively for transactional ends.”
He mentioned that it could be used to finance the public debt, although the administration of President Rafael Correa has insisted that this won’t happen. However, he cautioned that “you can’t create money out of nothing.”
He also lamented that the government had changed its previous stance on making the adoption of the system voluntary for financial institutions.
The resolution gives a sweeping and vague definition of “macroagents” for adoption: “companies, organizations, and public or private institutions; financial institutions of the popular and cooperative system; that maintain a network of establishments available for clients and are capable of acquiring mobile money, distributing it, or converting it into varieties of money.”
As of May 18 this year, 23,927 electronic-money accounts have been opened, according to BCE data.
The mandate on financial institutions to adopt the new system will apply in stages, depending upon the assets they possess. Those that hold U$1 billion and over in assets will have 120 days; those that have between $150 million and $1 billion will have 150 days; and those under $150 million will have 360 days to adopt the new system.
The Central Bank Supplanting Bitcoin?
Gustavo Solórzano Andrade, general manager of the BCE, stated in June 2014 that “the only currency of legal tender in Ecuador is the US dollar … used in all economic operations through payment methods authorized by the Central Bank of Ecuador … in this context, if an Ecuadorian citizen wishes to invest in bitcoins or another cryptocurrency it will be an individual and personal decision, and he will have to do so outside of Ecuadorian territory.”
The superintendent of Ecuador’s Banking and Securities body, Pedro Solines Chacón, further explained the ban by saying that “this cryptocurrency [bitcoin] has no regulating or supervisory body,” adding that cryptocurrencies carry the risk of money laundering and financing terrorism.
But for Luis Nuñez, a member of Ecuador’s bitcoin community, the absence of privacy in the BCE’s electronic money system “is far more worrying.”
“With the electronic currency all transactions are linked to your identity, something which doesn’t happen with physical money, so it seems like a de facto acquired right is being progressively lost,” he told the PanAm Post.
Nuñez further argues that the BCE’s new payment method and cryptocurrencies follow two distinct models: “Bitcoin has a decentralized model that has clear rules: it’s transparent and public, it promotes freedom, and it’s adopted freely; the other is a centralized model that seeks to control information, and in which the rules conform to the political vision of the day.”
Nevertheless, the bitcoin proponent concludes that the state-backed electronic tender wouldn’t affect the the fortunes of bitcoin in Ecuador. Instead, the “legal uncertainty” surrounding the digital currency in the Andean nation is far more damaging.