Top-Down Digital Currency Coming to Ecuador, with Ban on Competition
EspañolEcuador’s Congress, dominated by the ruling socialist PAIS Alliance, is on the verge of approving a new reform, presented by President Rafael Correa as an urgent matter. The law is for the creation of a digital currency and financial-regulation system controlled by the executive. At the same time, it prohibits any digital currency emitted by institutions other than the nation’s central bank.
Debate over the reform began at 9.30 AM local time on Tuesday, after 62 amendments from the Assembly’s Economic Commission. These came after Correa presented the original version on June 25, but none of the changes are structural or overturn the intent.
— Asamblea Nacional (@AsambleaEcuador) July 22, 2014
Minister of Economic Policy Patricio Rivera said that “with this new code we hope the banking industry will collaborate with the people, and not the people for the banking industry, which is what has been happening since the 1990s.”
According to the bill’s Article 99, the Monetary and Financial Regulatory Committee will regulate the digital currency, and the Central Bank will handle its implementation, development, and evolution.
Opposition Representative Ramiro Aguilar, in a show of support across party lines, affirmed during the committee’s Saturday session that “the provision of a digital currency will be backed by its liquid assets” (presumably with cash reserves). “I think this will give the country some calm,” he added.
Innovation, Privacy within a Monopoly?
Cryptocurrency enthusiasts fear the second element of this proposal. In addition to a digital currency to work alongside the US dollar (Ecuador’s official currency since 2000), the central government is set to prohibit the “emission, production, initiation, falsifications, or any other type of [digital currency] simulation, and its circulation through any channel or way of representation,” as stated under Article 96.
Beyond digital currencies, Article 96 of the reform prohibits the circulation and acceptance of all currencies not authorized by the Monetary and Financial Political Regulatory Committee: “Violations of these prohibitions will be sanctioned according to what is stated under the country’s Penal Code, and whatever is found will be confiscated along with the purchased products.”
— CAN Sucumbíos (@CANSucumbios) July 22, 2014
The Bitcoin Community of Ecuador sent a statement of concern to the Assembly. They want representatives to take into consideration the proposed legislation’s threat to the privacy of Ecuadorians and to their freedom to use decentralized cryptocurrencies, such as bitcoin and litecoin.
In their open letter, they also request that the committee include a clause that distinguishes personal data from the digital-currency transactions system.
“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,” states the letter.
On the basis of voluntary exchange, they ask that decentralized cryptocurrencies be excluded from Article 96, which prohibits the emission and circulation of unapproved currencies.
Luis Nuñez, a member of Ecuador’s Bitcoin Community told the PanAm Post that “If what will be emitted is a national digital currency, then they must separate personal data from transaction data. At the design level, more than at the political level. History has shown us consistently that politics can be revoked at any time, and [the reform] will not necessarily fulfill its purpose, which is why we require the incorporation of a privacy algorithm and for the code to be verifiable.”
He explains that the Ecuadorian Constitution is clear with respect to the right to privacy. This includes any form of communication.
With regards to the project’s other regulatory implications, the Monetary and Financial Regulatory Committee are set to have the authority to police credits traded by non-financial. Their task will be to prevent abuses, excessive prices, and an economic crisis.
A vote is set to take place on Thursday, with near-certain approval. The amended bill will then be in the hands of the executive branch.
Editor’s note: the English version includes updated material, in addition to what appears in the Spanish from the previous day.