I just heard the news from Ecuador a few days ago after seeing an article from CBS Money Watch. After some research, I learned that the Ecuadorian National Assembly actually voted in July to ban cryptocurrencies. At the same time, the National Assembly voted to create a State-run cryptocurrency that some believe may replace the USD as the official currency of the socialist nation. President Rafael Correa denies any plan to replace the U.S. dollar, and said the project’s only problem is that it has taken this long.
A statement by the National Assembly reads, “electronic money will stimulate the economy,” adding that it will be accessible to more Ecuadorians, especially those who are unbanked. The new Ecuadorian e-currency, according to the National Assembly “will be backed by the assets of the Central Bank of Ecuador.”
The Ecuadorian government is combining one of the best aspects of Bitcoin, helping the unbanked, with the worst aspect of government, control! For many, the draw of Bitcoin and other cryptocurrencies is the fact that there is no central authority that has total control over the currency. Few details have been released about the state-run cryptocurrency, other than it is expected to begin circulating in December, does not yet have a name, it would not be “like Bitcoin” and the amount created will supposedly depend on demand. Though, as with all things government controlled, supply and demand are rarely at a happy medium. One of the major downsides to having any state-run currency, is the ease with which the central authority can inflate the currency – can you say “Quantitative Easing”?
Additionally, at this time, use of the e-currency would not be mandatory, and the law currently says the new currency will not be used to pay public employees or state contractors. This may be the only redeeming quality of the entire legislation. Though, if the Ecuadorian President or National Assembly ever decide they want to drop the USD, then expect public employees to be paid in the new currency. The next step after that is to declare the e-currency legal tender, and then people will be forced to use it.
The chairman of the Committee on Economic and Tax Regime stressed this is the result of extensive socialization with the public and private banks. More socialization is never the answer to combat growing socialization, nor does it make sense to attempt to ban people for using a currency that competes with a supposedly voluntary currency. I hope that the Bitcoin users of Ecuador are neither scared to continue using the currency, nor punished for daring to compete with this supposedly voluntary state-run e-currency. I guess only time will tell if the socialist government decides that cryptocurrency IS a crime!