This article is part of a series on governments with an anti-crypto stance.
Like other regions in the world, South America welcomed the cryptocurrency revolution, granted the large percentage of unbanked individuals, and opportunities offered by digital assets. While most countries in the region are either neutral, or positive towards the emergence of the crypto market, some have chosen a more aggressive stance. In this article, we will conduct a case study, analysing the situation in two countries that have positioned themselves as anti-crypto: Bolivia and Ecuador.
The crypto situation in Bolivia
Here, the crypto market was affected by a decision announced by the El Banco Central de Bolivia, which is the nation’s central bank. Back in 2014, when bitcoin started gaining more media coverage, the central bank announced its decision to ban all currencies that were not issued or regulated by a government. The list of forbidden digital assets included bitcoin, alongside other altcoins like PeerCoin or NameCoin.
The statement responsible for the ban read: “It is illegal to use any kind of currency that is not issued and controlled by a government or an authorized entity.”The Bolivian central bank quickly backed its decision through a few arguments. According to them, the motivation lays in doing everything in their power to protect the country’s national currency – the boliviano. Secondly, the bank stated that uncontrolled currencies can have unprecedented effects, thus causing users to lose their money.
Following the announcement, members of the financial community quickly reacted, stating that the decision was unwise granted that Bolivia is one of the poorest Latin American countries. Thus, banning bitcoin would reduce development and innovation of the fintech market there. Reports that emerged in 2017 showcase that the Bolivian government is relatively serious about imposing its ban. With this in mind, the country’s Financial System Supervision Authority (ASFI) reportedly arrested 60 people for promoting bitcoin investments.
According to the ASFI, “ee confiscated pamphlets relating to business schemes that go around giving training and making business plans regarding virtual currencies that are operating abroad. The Bolivian population should not be fooled. It should not participate in closed crypto groups through WhatsApp. The only thing they are doing is taking advantage of the population, deceiving the people to appropriate their money.”
Following the arrests, the ASFI reiterated its belief that digital currencies are nothing but illegal pyramid schemes. Despite the grim situation, the Bolivian government cannot control private cryptocurrency use, such as trading crypto-for-crypto. So far, no plans to positively regulate the industries have been announced.
The crypto situation in Ecuador
The situation is Ecuador is quite interesting, given the motivation behind the reported cryptocurrency ban. To put things better into perspective, back in 2014, the country’s National Assembly decided to impose a ban against digital currencies, through a reform of its financial laws. As such, buying, selling, and using digital assets became illegal. Violating the amendments would lead to a penal sanction, followed by the confiscation of the assets in question. However, the ban was imposed in favour of Ecuador’s very own digital cash system.
Thus, Ecuador became one of the world’s first countries to work on its own central bank digital currency. According to its National Assembly, “Digital 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 digital currency will be backed by the assets of the Central Bank of Ecuador.”
The Ecuadorian central bank later talked about the benefits associated with this system. According to them, the digital cash system would reduce transaction and monetary issuance costs, while also providing citizens with an easier method of sending money digitally, via their smartphones. Controversies were quick to appear. A popular one mentioned that the CBDC’s purpose was to allow the country’s central bank to issue new currency that wouldn’t be tied to the United States dollar reserves, as per international regulations. So far, it is unclear to what extent the bitcoin ban is respected, and whether the digital cash system is actually a popular payment option used by the citizens.
Disclaimer: If you are looking to conduct digital currency-related activities in China, it is best to thoroughly check the updated applicable laws. Do not take the information presented in this article as advice.
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