CRYPTOCURRENCIES IN ECUADOR: SITUATION AND PROSPECTS
By Hugo Orella
With the help of the internet, a new financial exchange system based on blockchain technology has been created. Commonly known as cryptocurrencies, this exchange system has been operating worldwide for several years with Bitcoin being the most widespread of all.
The main advantage of these systems is that they do not depend on any authority or central bank. This blockchain technology prevents counterfeiting, possible privacy violations, and reduces transaction costs.
Cryptocurrencies are traded all over the world and Ecuador is no exception. Despite the fact that these are not officially accepted in the country as a means of payment, as determined in Article 94 of the Financial Monetary Code which establishes that the Dollar of the United States of America is the only currency of legal tender in Ecuador, this type of virtual currency is already used actively in the country. Bitcoin can be found in some shops and service providers around the country.
The Constitution of the Republic of Ecuador has the right to control economic activities, to acquire goods and services with quality and efficiency, and the right to property. Additionally, the Organic Law of Consumer Protection guarantees the right of consumers to choose goods freely and ensures that the supplier, whether public or private, offers quality goods or services. For which, the current Ecuadorian regulations do not explicitly prohibit the sale of cryptocurrencies online.
Therefore, we can consider cryptocurrencies as a financial asset that is susceptible to exchange over the internet with other goods or services. This is protected in the field of private law by the purchase and sale contract, which constitutes payment of an amount of money for a certain number of cryptocurrencies. Thus, the Ecuadorian Civil Code in its Article 1492 establishes the minimum parameters of validity of any sales contract, in accordance with the provisions of the Electronic Commerce Law, which cover these contracts as long as they comply with the requirements of the capacity, object and cause law.
In Ecuador, no controls or limits have been established thus far regarding the acquisition and use of cryptocurrencies. Many people acquire them and use them in good faith as a personal investment or investment vehicle. It should be noted though that they are subject to deceit or scams with fraud offers of excessive returns or benefits, particularly if users lack knowledge or financial education of the currency.
The Central Bank of Ecuador has indicated that, “The purchase and sale of cryptocurrencies through the internet is not prohibited." This has led to the proliferation of portals or virtual markets that in many cases are not recognized by any legislating body. According to what was quoted by the newspaper Primicias, these virtual markets move an equivalent of about USD 400 million a year into the country.
Ecuador does not have its own cryptocurrency, however there are very interesting national technological initiatives for the development of exchanges or exchange houses legally constituted in the country, such as the Bank of the Future. According to information currently available, this will allow the exchange and negotiation of these financial assets safely over the internet, and with total transparency, which will provide greater security for those who wish to access these technologies.
Currently the users of these cryptocurrencies in the country constitute a minority group, however in view of the growth of these digital technologies, this group will certainly be increasing. Therefore it is necessary that there is legislation that protects these users. Additionally, we must also develop secure technological mechanisms, such as those referred to above, that allow users to buy or sell in a safe and valid manner which reduces the risk of fraud. Thus, the Central Bank of Ecuador has already indicated that at the end of this year it will issue the regulatory framework for the development of these technologies, which will provide more clarity for the participants and users involved in these types of negotiations.
Therefore, the future of cryptocurrencies to create a strong financial culture in Ecuador are favorable with the correct use, and adequate legislation of this technology. National perspectives hope to see the trading volume increase both nationally and internationally with this new culture as well.
In conclusion, the main objective of both the public and private sectors for an optimal development of this type of technology in Ecuador should be the responsible training and socialization of citizens, with the aim of forming a community that understands these concepts. Knowledge is the most important tool that people can use to ensure correct use, and large returns, when using these non-traditional, and traditional, markets as investment mechanisms.
There is no doubt that financial markets evolve, which forces us to have to learn and use the new financial products that derive from this evolution. Cryptocurrencies promise to be one of the most important markets in the world and we will surely have to adapt, and get ahead, to take advantage of these trends immediately.