Instead
As the rapid growth of cryptocurrency projects like Worldcoin continues to gain momentum in Ecuador, the country’s central bank (Banco Central del Ecuador, BCE) has reiterated that digital assets have no legal status and cannot be used as an official electronic means of payment.
The BCE’s statement comes in response to the increasing number of people in Ecuador conducting cryptocurrency transactions, particularly through the Worldcoin project, under which thousands of individuals have received a universal basic income in the form of 60 WLD tokens.
Impact of Worldcoin and public engagement in Ecuador
Worldcoin, a cryptocurrency project launched in Ecuador just a few weeks ago, has quickly gained attention, with thousands of Ecuadorians participating in the program.
According to reports on social media, hundreds of people gathered in Guayaquil, one of Ecuador’s largest cities, to register for Worldcoin at designated locations equipped with orbs that scan participants’ irises.
Despite the growing popularity of Worldcoin and other digital currencies, the BCE has stressed that the US dollar remains the only currency with legal tender status in Ecuador.
This stance is supported by Article 94 of the Organic Monetary and Financial Code (COMF) and the Monetary and Financial Regulation Policy Board (JPRM) resolutions of February 2022 and August 2023, which reaffirm the US dollar as the official currency for all transactions, monetary and financial processes, and accounting records in the country.
Classification of payment methods and restrictions on cryptocurrencies
On August 7, 2023, the JPRM further clarified the classification of payment methods in Ecuador with Resolution No. JPRM-2023-014-M.
According to this resolution, payment methods in Ecuador are divided into three types: physical payment methods, electronic payment methods and electronic wallets.
Electronic payment methods include electronic money transfers for payments and collections, credit and debit cards, and reloadable or non-reloadable prepaid cards.
Cryptocurrencies do not fall into this classification, meaning they are neither recognized as legal tender nor as an authorized electronic payment method in Ecuador.
Ecuador’s growing crypto market despite regulatory restrictions
Despite these regulatory restrictions, Ecuador is seeing significant activity in the cryptocurrency market.
According to a report by US blockchain data firm Chainalysis titled “Geography of Cryptocurrencies 2023,” Latin America accounted for approximately 7.3% of the total global value of digital assets between July 2022 and June 2023.
Within the region, Ecuador ranked seventh in terms of the value of cryptocurrencies received, with a total estimated value of nearly $7 billion during this period.
The report suggests that Ecuadorians typically acquire cryptocurrencies in a variety of ways, including with cash, credit or debit card payments, and local remittances.
However, the high volume of cryptocurrency transactions – totaling billions – raises questions about the primary payment methods used.
If these transactions had been carried out primarily with cash or credit cards, Ecuador would likely have experienced a significant outflow of foreign exchange, leading to a reduction in the country’s foreign exchange reserves.
Regulatory notices and the future of digital assets in Ecuador
JPRM and BCE have reminded both citizens and businesses that cryptocurrencies are neither legal tender nor a valid means of payment in Ecuador.
While digital assets are becoming increasingly popular, strict regulations remain in place in Ecuador, with authorities stressing the importance of adhering to existing laws to maintain economic stability and financial integrity.
The rise of cryptocurrency projects like Worldcoin in Ecuador highlights the ongoing challenges and opportunities in the digital asset landscape.
While the country’s central bank maintains its hardline stance on the legal status of cryptocurrencies, Ecuadorians’ increasing engagement in the crypto market suggests that demand for digital assets will continue.
Ecuador’s regulatory framework will play a crucial role in shaping the future use of cryptocurrencies in the country.
