While most countries take the wait-and-see approach with regard to Bitcoin and other digital currencies, Ecuador has officially banned them. The reason behind this decision is not because the government doesn’t trust it, but because it’s decided to make its own digital currency that will compete with Bitcoin and others

The National Assembly of Ecuador, the legislative branch of the government, has approved amendments to the country’s existing monetary and financial laws, and is now awaiting the signature of President Rafael Correa to finalize them. One of the amendments include the prohibition of using other digital currencies aside from that which is backed by the Banco Central del Ecuador.

The two agencies will be closely working together in the development of this state-backed digital currency. The National Assembly will oversee the new currency, while the national bank will develop and integrate it into the broader financial system. It will operate in tandem with the US dollar, the nation’s official currency, but the exchange rate has yet to be established.

The National Assembly believes that this new digital currency will provide benefits to both the underbanked and broader economy.

“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 National Assembly stated.

The state of Bitcoin in Ecuador

With the law awaiting the signature of Ecuador’s president, it looks as though Bitcoin and other altcoins will have no place in the country to proliferate.

Exchange markets and other businesses that revolve around Bitcoin may therefore cease to exist, as the bill prohibits the “emission, production, initiation, falsifications, or any other type of [digital currency] simulation, and its circulation through any channel or way of representation” of non-sanctioned digital currencies.

If caught engaging in transactions involving unsanctioned digital currencies, the digital coins will be confiscated and the violators will be prosecuted.

Prior to the debate regarding the amendments in the monetary law, La Comunidad Bitcoin Ecuador, the country’s biggest Bitcoin organization, sent an open letter to the National Assembly calling for transparency and respect for the rights of consumers. It said that as a pioneer in creating the first state-backed digital currency, it should implement  “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.”

Despite the grim future this bill poses for decentralized digital currencies in Ecuador, deBitcoin.org’s Paul Buitink argues that the amendments do not cover Bitcoin as the exact legal definition of Bitcoin in Ecuador is not clear.

So will Bitcoin in Ecuador soon cease to exist? We’ll just have to wait and see what the Ecuadorian government comes up with and if it will be accepted by the public, especially by those who are already using Bitcoin.

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