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Ecuador

Retail_Trading_Status

Allowed-Unregulated Unknown
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Analysis ID
#86
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Archived
Created
2025-04-12 06:43
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Executive Summary

In Ecuador, retail cryptocurrency trading is Allowed-UnRegulated; individuals can buy, sell, and hold crypto, but its use as legal tender is prohibited. The Central Bank of Ecuador (BCE) allows ownership due to constitutional property rights but emphasizes the US Dollar as the sole legal tender. Recent AML legislation introduces Virtual Asset Providers (PAV) which will require licensing and AML/CFT compliance, though specific rules are pending. Financial institutions are barred from crypto activities, and the BCE actively warns about associated risks.

Key Pillars

The primary regulator is the Central Bank of Ecuador (BCE), which permits the ownership and trading of cryptocurrencies as digital assets, but prohibits their use as legal tender. The Organic Monetary and Financial Code (COMF) and recent AML legislation define the regulatory landscape. Core compliance requirements, primarily through the August 2024 AML law, focus on AML/CFT regulations for Virtual Asset Providers (PAVs), including registration, licensing, and reporting to the Financial Analysis Unit (UAFE). There are currently no specific licensing or registration requirements for individuals engaging in retail cryptocurrency trading, but PAVs are required to obtain a license from the Superintendency of Banks.

Landmark Laws

  • Organic Monetary and Financial Code (COMF): Article 94 establishes the US Dollar as the sole legal tender. Article 98 prohibits the use of cryptocurrencies as a means of payment.
  • Fintech Law of 2022: Aims to regulate financial technology services but does not specifically create a comprehensive framework for cryptocurrencies.
  • "Ley Orgánica para la Mejora Recaudatoria a través del Combate de Lavado de Activos" (Organic Law for Improving Tax Collection through Combating Money Laundering): Enacted in August 2024, introduces the concept of "Virtual Asset Providers" (PAV) and imposes AML/CFT compliance requirements.

Considerations

Cryptocurrencies are classified as digital assets but are not legal tender in Ecuador. The BCE and other regulatory bodies have issued warnings about the volatility, speculative nature, lack of backing, and potential for financial loss associated with cryptocurrencies. Financial institutions are barred from participating in cryptocurrency transactions, restricting direct access to the crypto market through Ecuadorian bank accounts. The August 2024 AML law potentially enables taxation of crypto assets through the regulation of Virtual Asset Providers.

Notes

The Central Bank of Ecuador (BCE) has consistently maintained its stance on cryptocurrencies since at least January 2018. The General Manager of the BCE acknowledged the need for a specific law to regulate crypto asset investment in August 2024. There are concerns from the Superintendency of Companies, Securities, and Insurance regarding unregulated activities. The rules governing PAV licensing and operation as of December 2024 are still pending development. The UPay Blog is included as a reference but noted to be used with caution. The regulatory landscape remains ambiguous due to the absence of clear guidelines, as noted in April 2024 by Lexology (Heka Law Firm Analysis).

Detailed Explanation

Retail cryptocurrency trading in Ecuador is currently Allowed-UnRegulated. Individuals are permitted to buy, sell, and hold cryptocurrencies, but this activity occurs within an ambiguous regulatory environment. The Central Bank of Ecuador (BCE) has stated, in January 2018 and reaffirmed by its General Manager in August 2024, that the purchase and sale of cryptocurrencies like Bitcoin by individuals is not prohibited, citing constitutional property rights. However, Article 94 of the Organic Monetary and Financial Code (COMF) establishes the US Dollar as the sole legal tender, and the BCE consistently reiterates that cryptocurrencies are not authorized as a means of payment. Article 98 of the COMF explicitly prohibits using crypto for payments, and the BCE has warned of potential investigations and sanctions by the Attorney General's Office. There isn't a comprehensive regulatory framework governing cryptocurrency trading platforms or imposing crypto-specific KYC/AML requirements for retail transactions. The General Manager of the BCE acknowledged the need for a law to regulate crypto asset investment in August 2024. Financial institutions, regulated by the Superintendency of Banks (SB) and the Superintendency of Popular and Solidarity Economy (SEPS), are strictly prohibited from engaging in cryptocurrency transactions. The Fintech Law of 2022 does not specifically create a comprehensive framework for cryptocurrencies. The "Ley Orgánica para la Mejora Recaudatoria a través del Combate de Lavado de Activos" (Organic Law for Improving Tax Collection through Combating Money Laundering), enacted in August 2024, introduced "Virtual Asset Providers" (PAV), potentially including exchanges. PAVs are required to register, obtain a license from the Superintendency of Banks (subject to rules yet to be defined), and comply with AML/CFT regulations, including reporting suspicious transactions and those over USD 10,000 to the Financial Analysis Unit (UAFE). The BCE frequently issues warnings about the risks associated with cryptocurrencies, emphasizing their volatility and speculative nature. The Superintendency of Companies, Securities, and Insurance has also expressed concern regarding unregulated activities. The official communication from the Superintendency of Popular and Solidarity Economy (SEPS) in February 2023 prohibits financial institutions from registering cryptoassets, carrying out campaigns related to crypto, and facilitating operations with digital assets.

Summary Points

Okay, here's a bullet-point summary of the provided report on the regulatory status of retail cryptocurrency trading in Ecuador, designed for clarity and quick comprehension:

Retail Cryptocurrency Trading Status in Ecuador: Summary

I. Overall Regulatory Status:

  • Allowed-Unregulated: Individuals can legally buy, sell, and hold cryptocurrencies. However, the activity is largely unregulated, although recent AML legislation is beginning to address service providers.

II. Key Regulatory Bodies & Roles:

  • Central Bank of Ecuador (BCE):
    • Acknowledges the legality of individual crypto ownership and trading.
    • Explicitly prohibits the use of cryptocurrencies as legal tender or means of payment.
    • Issues warnings about the risks associated with cryptocurrencies.
    • Notifies the State Attorney General's Office if crypto is used as a means of payment.
    • Acknowledges the need for a law to regulate crypto asset investment to protect investors and promote innovation.
  • Superintendency of Banks (SB):
    • Regulates the formal financial system.
    • Will supervise Virtual Asset Providers (PAVs) once licensing rules are defined.
  • Superintendency of Popular and Solidarity Economy (SEPS):
    • Regulates popular and solidarity economy institutions.
    • Prohibits institutions under its control from engaging in any crypto-related activities.
  • Monetary and Financial Policy and Regulation Board (JPRM):
    • Will establish regulations for PAV licensing.
  • Financial Analysis Unit (UAFE):
    • Receives reports of suspicious crypto transactions and those over USD 10,000 from PAVs.

III. Key Legislation & Regulations:

  • Organic Monetary and Financial Code (COMF):
    • Article 94: Establishes the US Dollar as the sole legal tender.
    • Article 98: Explicitly prohibits the use of crypto as payment.
  • Fintech Law of 2022:
    • Aims to regulate financial technology services but does not specifically create a comprehensive framework for cryptocurrencies themselves, though it acknowledges digital assets.
  • "Ley Orgánica para la Mejora Recaudatoria a través del Combate de Lavado de Activos" (Organic Law for Improving Tax Collection through Combating Money Laundering) (Aug 2024):
    • Introduces the concept of "Virtual Asset Providers" (PAVs).
    • Requires PAVs to register, obtain a license (subject to future rules), and comply with AML/CFT regulations.

IV. Compliance Requirements (Primarily for PAVs):

  • Registration and Licensing: PAVs must register and obtain a license from the Superintendency of Banks (SB).
  • AML/CFT Compliance: PAVs must comply with Anti-Money Laundering and Counter-Terrorism Financing regulations.
  • Reporting Requirements: PAVs must report suspicious transactions and those exceeding USD 10,000 to the Financial Analysis Unit (UAFE).

V. Notable Restrictions & Limitations:

  • No Legal Tender Status: Cryptocurrencies are not legal tender and cannot be used as a means of payment for goods and services.
  • Financial Institution Restrictions: Banks and other formal financial institutions are prohibited from engaging in cryptocurrency transactions (holding, trading, facilitating).
  • Lack of Comprehensive Regulation: There is no specific, comprehensive regulatory framework governing cryptocurrency trading platforms or imposing crypto-specific KYC/AML requirements for retail transactions (except for the recent AML law impacting PAVs).

VI. Recent Developments & Changes:

  • AML Law Targeting PAVs (Aug 2024): The "Ley Orgánica para la Mejora Recaudatoria a través del Combate de Lavado de Activos" introduces regulations for Virtual Asset Providers, focusing on AML/CFT compliance and licensing. Specific rules are still pending.
  • Official Warnings: The BCE and other regulatory bodies continue to issue warnings about the risks associated with cryptocurrencies.
  • Superintendency of Companies, Securities, and Insurance expressed concern regarding unregulated activities like Worldcoin's iris scanning for crypto, noting the lack of state regulation.

Full Analysis Report

Report on the Current Status of Retail Cryptocurrency Trading in Ecuador

Topic: Retail_Trading_Status
Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

1. Current Status: Allowed-UnRegulated

2. Detailed Narrative Explanation:

The status of retail cryptocurrency trading in Ecuador is best described as Allowed-UnRegulated. While individuals are legally permitted to buy, sell, and hold cryptocurrencies, this activity exists in a complex and somewhat ambiguous regulatory environment.

  • Legality of Ownership and Trading: The Central Bank of Ecuador (BCE) has explicitly stated on multiple occasions, including in official communications from January 2018 and more recently confirmed by its General Manager in August 2024, that the purchase and sale of cryptocurrencies like Bitcoin by individuals is not prohibited [6, 3, 20]. This right stems from constitutional property rights, allowing individuals to acquire digital assets [7]. Therefore, owning and trading crypto is legal for retail investors.

  • Prohibition as Legal Tender/Means of Payment: Despite allowing ownership and trading, Ecuadorian law, specifically Article 94 of the Organic Monetary and Financial Code (COMF), establishes the US Dollar as the sole legal tender [4, 14]. The BCE and other regulatory bodies consistently reiterate that cryptocurrencies are not authorized as a means of payment for goods and services within Ecuador [4, 6, 12]. Using crypto as payment is explicitly prohibited by Article 98 of the COMF, and the BCE has warned that such usage could be reported to the Attorney General's Office for investigation and sanctions [4, 9, 10].

  • Lack of Specific Regulation and Supervision: There is currently no specific, comprehensive regulatory framework governing cryptocurrency trading platforms (exchanges) or imposing crypto-specific KYC/AML requirements for retail transactions [5, 7, 13]. Financial transactions involving cryptocurrencies are not controlled, supervised, or regulated by any specific Ecuadorian entity in the way traditional financial activities are [6, 7]. This lack of dedicated regulation contributes to the "Unregulated" aspect of the status. The General Manager of the BCE acknowledged in August 2024 the need for a law to regulate crypto asset investment to protect investors and promote innovation [3].

  • Restrictions on Financial Institutions: The formal financial system, regulated by the Superintendency of Banks (SB) and the Superintendency of Popular and Solidarity Economy (SEPS), is strictly prohibited from engaging in cryptocurrency transactions [1, 8, 15, 23]. Banks and other financial institutions cannot hold, trade, facilitate, or register crypto assets on their balance sheets [8, 23]. This effectively isolates the formal banking sector from the crypto market and means individuals cannot easily use Ecuadorian bank accounts to directly fund or withdraw from crypto exchanges operating within the formal financial system [1, 8].

  • Recent Developments (Fintech and AML Laws):

    • The Fintech Law of 2022 aims to regulate financial technology services but does not specifically create a comprehensive framework for cryptocurrencies themselves, though it acknowledges digital assets [2].
    • The "Ley Orgánica para la Mejora Recaudatoria a través del Combate de Lavado de Activos" (Organic Law for Improving Tax Collection through Combating Money Laundering), enacted in August 2024, introduced the concept of "Virtual Asset Providers" (Proveedores de Activos Virtuales - PAV) [11, 21]. This law requires PAVs (which could include exchanges) to register, obtain a license from the Superintendency of Banks (subject to rules yet to be defined by the Monetary and Financial Policy and Regulation Board), and comply with AML/CFT regulations, including reporting suspicious transactions and those over USD 10,000 to the Financial Analysis Unit (UAFE) [11, 17, 21]. While this represents a step towards regulation, particularly concerning AML, the specific rules governing PAV licensing and operation are still pending development [21]. It focuses on regulating the providers rather than the act of retail trading itself, and aims primarily at preventing illicit activities and potentially enabling taxation [11, 17].

  • Official Warnings: The BCE frequently issues warnings about the risks associated with cryptocurrencies, emphasizing their volatility, speculative nature, lack of backing, and potential for financial loss [3, 4, 6, 9]. The Superintendency of Companies, Securities, and Insurance has also expressed concern regarding unregulated activities like Worldcoin's iris scanning for crypto, noting the lack of state regulation [3].

In summary, Ecuador allows its citizens to buy, sell, and hold cryptocurrencies as digital assets but strictly prohibits their use as payment. The activity is largely unregulated from a specific crypto-trading perspective, although recent AML legislation is beginning to address service providers. Financial institutions are barred from participating, and regulators actively warn citizens about the associated risks.

3. Relevant Text Excerpts:

  • Central Bank of Ecuador (BCE) (Jan 2018): "It is important to point out that the purchase and sale of cryptocurrencies -like bitcoin- through the Internet is not prohibited; however, it is emphasized that bitcoin is not legal tender and is not authorized as a means of payment for goods and services in Ecuador, as established in article 94 of the Organic Monetary and Financial Code." [6]
  • Central Bank of Ecuador (BCE) General Manager (Aug 2024): "At no time has the ECB banned investment in cryptoassets, as this is not within our powers to do so... The Central Bank has the power to control that the only means of payment authorized in the country is the United States dollar... Ecuador needs a law that regulates investment in cryptoassets, in order to protect investors, promote innovation, and strengthen dollarization." [3]
  • Central Bank of Ecuador (BCE) (Aug 2024): "The JPRM [Monetary Policy and Regulation Board] and the Central Bank of Ecuador (BCE) remind natural and legal persons that cryptoassets are not legal tender, nor an authorized means of payment in Ecuador... The BCE, in case of identifying the use of cryptoassets as a means of payment, will notify the State Attorney General's Office for its corresponding investigation and sanction." [4]
  • Organic Law for Improving Tax Collection through Combating Money Laundering (Aug 2024) via Derecho.ec Analysis: "The new article 99.1 defines Virtual Asset Providers as: 'Obligated subjects whose business or business activity is the exchange between virtual assets and legal tender currencies; the exchange between one or more forms of virtual assets; the transfer of virtual assets; the custody or administration of virtual assets or instruments that allow control over them; and the participation and provision of financial services related to the offer of an issuer or sale of a virtual asset.' [...] Now, Virtual Asset Providers (PAV) may operate under the supervision of the Superintendency of Banks, provided they obtain a license and comply with the regulations established by the Monetary Policy and Regulation Board." [21]
  • Superintendency of Popular and Solidarity Economy (SEPS) (Feb 2023): "As a consequence of this prohibition [financial institutions participating in crypto activities], the institutions subject to the control of this entity are prevented from registering any type of cryptoasset in their financial statements; from carrying out, directly or through third parties, campaigns related to the use, acquisition, sale, exchange or investment with digital assets; and, from facilitating their partners or clients to carry out operations with digital assets." [23]
  • Lexology (Heka Law Firm Analysis) (Apr 2024): "Financial transactions conducted through cryptocurrencies remain uncontrolled, unsupervised and unregulated by any entity in Ecuador, presenting inherent financial risks. While online buying and selling of cryptocurrencies are not prohibited, it is crucial to understand that cryptocurrency is not considered legal tender and is unauthorised as a means of payment for goods and services in Ecuador. On the regulatory front, Ecuador's stance on cryptocurrencies is ambiguous because of the absence of clear guidelines." [7]

4. Source URLs:

  • [3] Ecuador Central Bank: We Do Not Have Power to Ban Crypto (Bitcoinworld via Binance Square - Aug 2024): https://www.binance.com/en/square/post/9990357254185 (Note: Secondary source summarizing official statements)
  • [4] Los criptoactivos no son una moneda de curso legal, ni un medio de pago autorizado en ecuador (Banco Central del Ecuador - Aug 2024): https://www.bce.fin.ec/boletines-de-prensa-archivo/los-criptoactivos-no-son-una-moneda-de-curso-legal-ni-un-medio-de-pago-autorizado-en-ecuador
  • [6] COMUNICADO OFICIAL SOBRE EL USO DEL BITCOIN (Banco Central del Ecuador - Jan 2018): https://www.bce.fin.ec/index.php/boletines-de-prensa-archivo/item/1018-comunicado-oficial-sobre-el-uso-del-bitcoin
  • [7] Lexology In-Depth: Fintech Law Ecuador (Heka Law Firm Analysis - Apr 2024): https://www.lexology.com/indepth/fintech-law/ecuador
  • [8] Crypto Adoption Around the World: Ecuador (UPay Blog - Nov 2024): https://upay.co.uk/blog/crypto-adoption-around-the-world-ecuador/ (Note: Blog, use with caution, but reflects general understanding)
  • [9] Banco Central de Ecuador advierte con denunciar uso de criptomonedas tras llegar Worldcoin (SWI swissinfo.ch - Aug 2024): https://www.swissinfo.ch/spa/ecuador-tecnolog%C3%ADa_banco-central-de-ecuador-advierte-con-denunciar-uso-de-criptomonedas-tras-llegar-worldcoin/87944318
  • [10] Amenaza del Banco Central: ¿Cómo se pena uso de criptomonedas como medio de pago? (Expreso - Aug 2024): https://www.expreso.ec/actualidad/economia/amenaza-banco-central-pena-uso-criptomonedas-medio-pago-207608.html
  • [11] Ley de lavado de activos: ¿las criptomonedas podrán usarse como medios de pago en Ecuador? (Ecuavisa - Dec 2024): https://www.ecuavisa.com/noticias/economia/ley-lavado-activos-criptomonedas-medios-pago-ecuador-FX8620491
  • [12] Criptomonedas en Ecuador: legalmente prohibidas pero imparables (Revista Gestión - Feb 2024): https://www.revistagestion.ec/economia-y-finanzas-analisis/criptomonedas-en-ecuador-legalmente-prohibidas-pero-imparables
  • [14] Criptomonedas y Ley de Quiebras (Apolo Abogados - Jan 2025): https://apolo.ec/criptomonedas-y-ley-de-quiebras/
  • [15] Regulaciones entre entidades financieras Ecuatorianas y criptomonedas (Polo del Conocimiento Journal - Feb 2025): https://polodelconocimiento.com/ojs/index.php/es/article/view/7911
  • [17] El Gobierno de Daniel Noboa apunta a controlar y cobrar impuestos a las criptomonedas (La Hora - Dec 2024): https://www.lahora.com.ec/pais/gobierno-daniel-noboa-apunta-controlar-cobrar-impuestos-criptomonedas/
  • [20] Cryptocurrency regulations by country (Thomson Reuters - Apr 2022): https://legal.thomsonreuters.com/content/dam/ewp-m/documents/legal/en/pdf/reports/cryptos-on-the-rise-2022.pdf
  • [21] Normativa legal para el comercio P2P de Criptomonedas en Ecuador (Derecho.ec - Dec 2024): https://derechoecuador.com/normativa-legal-para-el-comercio-p2p-de-criptomonedas-en-ecuador/
  • [23] Oficio Nro. SEPS-SGD-2023-04508-OFC (Superintendencia de Economía Popular y Solidaria - Feb 2023): https://www.seps.gob.ec/documents/20181/25854/Oficio+Nro.+SEPS-SGD-2023-04508-OFC.pdf/161069b9-34a4-1715-4893-75a418199419?t=1676319577012

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