Before issuing their own digital currency, Ecuador banned all others including bitcoin back in July 2014. However, today bitcoin’s use continues to grow in the country.
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Bitcoin Banned in 2014
As part of a reform to the country’s monetary and financial laws, Ecuador banned bitcoin and other digital currencies in July 2014. The then-President Rafael Correa, who served from 2007 to 2017, introduced the bill that made bitcoin illegal and signed it into law.
This law demands Bitcoin businesses “shut down their operations immediately.[…] Those who defy the ban will face prosecution, and all bitcoins circulated and assets in bitcoin trades face confiscation,” Panam Post reported at the time.
State-Run Digital Currency
Part of the aforementioned law calls for the creation of an Ecuadorian state-issued digital currency backed by the assets of the Ecuador’s Central Bank (BCE).
Soon after banning bitcoin, the government rolled out its own digital currency, called Dinero Electrónico. It is pegged one-to-one to the US dollar, which is the country’s official currency.
However, Ecuador’s private banks did not have confidence in the central bank’s electronic money system. Julio José Prado, President of the Association of Private Banks (ABPE) said at the time:
We cannot at this point support any financial program that is administered by the BCE since we have no confidence that it is secure.
Alexandra Veloz is an attorney based in Quito, the capital of Ecuador, and a member of the Ecuadorian Bar Association. She is currently the legal counsel for the Antigua Report. Referring to the state-run digital currency program, she said last week that “the new system has garnered plenty of criticism, and adoption from banks and customers has been limited at best.”
Use of Bitcoin Continues in Ecuador
Regarding the prohibition of bitcoin and other cryptocurrencies, Veloz explained that:
The prohibition, however, does not ban digital currency outright.[…] Ecuadorian officials have neglected to punish defiant bitcoin use.
She noted that the government’s move was “more precisely, a monopoly privilege: the Ecuadorian state has the exclusive power to put its own digital money into circulation via the central bank.”
Despite the government making bitcoin illegal, its use has not halted in Ecuador, Veloz shared. There are buyers and sellers in the country who list themselves on Localbitcoins.com and bitcoin can also be purchased via Paypal like other online purchases, the attorney detailed. At press time, the cost of a bitcoin in Quito on the Localbitcoins market carries at least a $200 premium. Veloz added:
A small number of businesses have also taken the risk of establishing bitcoin as an alternative for payment. The national taxation and invoicing system do not integrate these transactions, but they remain an available option.
The Ecuadorian Bitcoin community even gathered to celebrate Bitcoin Pizza Day on May 22.
Do you think the Ecuadorian government will allow Bitcoin to thrive? Let us know in the comments section below.
Images courtesy of Shutterstock, Payments Views, Ecuador’s Central Bank, Localbitcoins, and Bitcoinecuador.org
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