Ecuador’s National Assembly has voted to ban the digital currency known as bitcoin and established guidelines that would allow the country to create its own, state-run currency.
The law allows the government to make payments in “electronic money,” but bans decentralized digital currencies like bitcoin. It also establishes a central financial regulatory entity under the control of the presidency and prohibits the emission of digital currencies by any entity other than Ecuador’s Central Bank.
The new national electronic money will be backed by the assets of the Central Bank, which will be responsible for developing and planning how to incorporate it into the country’s existing financial system, while the National Assembly will be in charge of overseeing the currency itself. According to the proposal, the new currency will function alongside the U.S. dollar, the official currency of Ecuador. No exchange rate has been set.
The law has been criticized by some in Ecuador and the larger global community who say it jeopardizes the privacy of Ecuadorean citizens and restricts their financial freedoms. The Bitcoin Ecuador community presented an open letter to the National Assembly in which it requested, among other things, that the new currency ensure that its algorithms kept personal and transactional data separate in order to protect the privacy of users.
The Ecuador law is the second such bill passed in the region, following Bolivia legislation banning so-called cryptocurrencies passed in June.