Ecuador’s national assembly voted Thursday afternoon, local time, in favor of a new draft of the country’s monetary and financial code that, among other things, establishes a state monopoly over the issuance of “electronic money.”
The bill, with 91 votes in favor, now goes to President Rafael Correa, who must sign off on it before it can become law.
The new legal code would establish Ecuador’s central bank as the sole legal issuer of “electronic money,” effectively making decentralized cryptocurrencies such as Bitcoin illegal as forms of payment.
The bill then outlines a plan for the creation of a national electronic currency backed by the Banco Central de Ecuador, which will be pegged at a yet unknown rate to the US dollar.
So, essentially, Ecuador’s central bank wants to create a pre-blockchain digital currency then forbid innovative competitors. It’s creative destruction in reverse.
In the draft’s preamble, President Correa writes that the new code would allow individual humans to prevail over capital. He writes:
“The project seeks to continue a process of conversion of a bourgeois class status to a popular classless state where the rules are not defined by the ruling class (conceived as the media power of private financial groups, corporatism entrepreneurship or in public spaces, the domination of foreign powers or international bureaucracies) but by the people, people's power, the legitimate principal.”
The group BitcoinEcuador drafted an open letter to the assembly on Monday to make the case that the new monetary code fails to respect the privacy of individual finance and fails to embrace the potential of decentralized cryptocurrencies.
“Creating an electronic currency brings unquestionable benefits such as reduced costs for the system and user convenience; however, inadequate technical implementation may severely affect user privacy,” reads the letter, which is posted on the group’s home page.
The group’s letter asks the assembly to make two specific changes as regard cryptocurrencies:
- Exclude the prohibition of decentralized cryptocurrencies in Article 96
- Include in Article 98 that cryptocurrencies are a medium of exchange that are voluntary in nature, and clarify that the central bank’s regulatory powers extend only to its own national digital currency.
If this bill were to be signed into law, the effects would be immediate for local Bitcoin users and businesses.
Tuomas Santakallio (co-founder, Mundobitcoin): “Bitcoin will likely go underground, and Bitcoin businesses will have to exchange Bitcoin to State Digital Currency. But nobody will be able to stop people from using Bitcoin. It's digital, so it's even harder to stop than drugs. It's just like banning a book in the Internet age, or banning Bittorrent. Won't work. Banning will only make it more interesting to the average person. So, eventually they'll have to withdraw. I think that because Ecuador uses the dollar, the U.S. is lobbying behind, so the country could serve as a testing laboratory, but this is what I think. It's not facts. Just ideas.
Generally speaking, IMHO conservative attitudes clash with lack of education about what Bitcoin is. But now that they've already gone this far, it will be more difficult for the politicians, who often have a big ego, to admit that in fact they are wrong, so I think that give it one election season, and the mounting pressure from the people will make it easier.
People often have stronger feelings about money, than about downloading movies, so I think that by following Ecuador, the rest of the world can learn about the interplay between state, and grass-root movements. The government has a huge pressure to make their own digital money as credible as Bitcoin, which already has a huge number of users and a high market capitalization. If they fail, Bitcoin wins. If they succeed, Bitcoin prevails, but becomes legally slower.
Organizations such as the La Comunidad Bitcoin Ecuador have instrumental role in educating the authorities about Bitcoin. In my honest opinion, in order to lobby successfully, it is very important that the authorities are able to make their decision free of pressure, but educated and aware of repercussions.”
Patrick Dugan: "If one is a dedicated practicioner to Libertarian thinking or the like, this presents a fun paradox. On one hand this is heavy-handed Statism, banning competition, on the other hand, Ecuador's example will present a "free market" varation on how cryptocurrency might be implemented in a widespread economic fashion. A State monopoly on cryptocurrency in a small country might actually push adoption faster, and to higher levels of velocity, than a more bottom-up organic adoption. I would like to help maintain the peg, since Ecuador is already pegged to the dollar, trading CorreaCoin for DollarCoin is an easy liquidity provision to earn a small spread."
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