Ecuador

Superintendencia de Compañías, Valores y Seguros (SCVS): The superintendency responsible for regulating companies, securities, and insurance. This body would classify tokens as securities.

Banco Central del Ecuador (BCE): The Central Bank, which has historically taken a very strict stance against cryptocurrencies being used as means of payment.

Investment (Inversión): A contribution of money or other assets.

Expectation of Profit (Expectativa de Beneficio Económico): The token holder anticipates financial gain, yield, or appreciation.

Common Enterprise (Emprendimiento Común): The investment is pooled with others, and the success of the investment is tied to the collective efforts or the performance of a specific project, company, or platform.

Reliance on the Efforts of Others (Esfuerzos de Terceros): The profit is derived predominantly from the managerial or entrepreneurial efforts of the issuer or a third party, rather than the token holder's own efforts.

Security Tokens: These are explicitly designed to represent traditional securities such as shares, bonds, or interests in a fund. They confer rights like dividends, voting rights, profit sharing, or a claim on assets.

Investment Tokens: Tokens that are primarily sold to raise capital for a project or company, where purchasers expect a return on their investment due to the efforts of the issuer or a third party. This includes tokens that grant a share of future revenues, profits, or are marketed with promises of appreciation based on the success of a venture.

Certain Utility Tokens: While "pure" utility tokens that solely provide access to a product or service at the time of purchase might not be considered securities, if they are:

Marketed primarily for their speculative value or potential for price appreciation.

Purchased by investors with no intention of using the underlying service, but rather to resell them for profit.

Tied to the future success of a platform yet to be developed.

Stablecoins: While the SCVS focuses on securities, it's worth noting that the BCE would likely view any stablecoin as problematic if it attempts to function as a means of payment, especially if it is not backed by the USD or if its backing is not transparent and regulated by Ecuadorian authorities.

Payment Tokens / Cryptocurrencies (e.g., Bitcoin, Ethereum): These are generally not considered "securities" in the traditional sense, but their use as legal tender or alternative currency is explicitly prohibited by the Banco Central del Ecuador. Financial institutions are barred from facilitating transactions with them. This prohibition makes their status in Ecuador highly problematic, regardless of whether they are securities.

Registration with SCVS: Mandatory registration of the offering and the issuer with the Superintendencia de Compañías, Valores y Seguros.

Prospectus Requirements: Preparation and submission of a detailed prospectus containing comprehensive information about the issuer, the project, financial statements, risks, and the rights associated with the token.

Information Disclosure: Ongoing periodic and material event disclosures to the SCVS and the public.

Corporate Governance: Compliance with corporate governance standards applicable to public companies.

Private placements: Offerings made to a restricted number of sophisticated investors, not involving public solicitation.

Small offerings: Offerings below a certain monetary threshold, though these thresholds are usually quite low.

These exemptions are highly specific and would need to be rigorously adhered to; there are no specific "crypto-token" exemptions.

Regulated Exchanges: Secondary trading of registered securities typically must occur on regulated stock exchanges (Bolsas de Valores) authorized by the SCVS.

Broker-Dealer Registration: Entities facilitating the trading of such tokens would need to be registered as broker-dealers (casas de valores) with the SCVS.

Market Conduct Rules: Rules against market manipulation, insider trading, and other abusive practices would apply.

Custody: Custodial services for such tokens would likely require authorization and compliance with specific regulations.

BCE Resolution 066-2014-M (July 2014) and subsequent communications: The BCE explicitly prohibited "the use of virtual currencies that have not been issued or authorized by the Central Bank of Ecuador" within the national financial system. This resolution effectively outlawed the use of cryptocurrencies for payments and restricted financial institutions from dealing with them. While not about securities, this overarching prohibition creates an extremely difficult environment for any crypto-related activity, including token issuance.

Warnings and General Prohibitions: The SCVS, alongside the BCE and other financial regulators, has issued general warnings to the public about the risks associated with cryptocurrency investments and the lack of regulatory oversight. These warnings often highlight the potential for fraud and the absence of investor protection in unregulated markets.

Fines to the issuer and individuals involved.

Referrals for criminal prosecution if fraudulent activities are suspected.

Ley de Mercado de Valores (Securities Market Law):

Registro Oficial (Official Gazette) version: Accessing the most current consolidated version can be tricky online. A common source for Ecuadorian legislation is the official gazette database or specialized legal information sites.

Link (referential - may not be the latest consolidated text): Lexis.com.ec - Ley de Mercado de Valores (Note: This is a legal information service; direct government links are harder to pinpoint for the consolidated text). It's best to consult official government publications.

Resolutions from the Banco Central del Ecuador (BCE) regarding cryptocurrencies:

Resolution 066-2014-M (July 2014): This is the foundational resolution prohibiting cryptocurrencies as means of payment.

BCE Official Communications and Press Releases: The BCE frequently publishes updates.

Link to BCE website (look for "Comunicados de Prensa" or "Resoluciones"): Banco Central del Ecuador

While specific resolution links change, searching for "criptomonedas" or "monedas virtuales" on the BCE site will yield relevant press releases and statements.

The SCVS website would be the primary source for any guidance or resolutions they might issue regarding securities.

Link: Superintendencia de Compañías, Valores y Seguros

Search within their "Normativa" or "Boletines" sections for any mention of "criptoactivos" or "tokens." However, as noted, specific crypto-securities guidance is not as prominent as the BCE's stance on payments.

Unidad de Análisis Financiero y Económico (UAFE) - The Financial and Economic Analysis Unit.

Ley Orgánica de Prevención, Detección y Erradicación del Delito de Lavado de Activos y Financiamiento de Delitos (Organic Law for the Prevention, Detection, and Eradication of the Crime of Money Laundering and Financing of Crimes)

Issued: May 2016 (with subsequent reforms).

This is the foundational AML/CFT law in Ecuador, establishing the general framework, defining money laundering and terrorist financing crimes, and outlining the obligations for "obligated subjects." It empowers UAFE to issue specific regulations.

Resolución No. UAFE-DG-2022-0001 (Resolution No. UAFE-DG-2022-0001)

This is the key regulation for VASPs. It explicitly designates Virtual Asset Service Providers (VASPs) as "Obligated Subjects" (Sujetos Obligados) under the AML/CFT framework in Ecuador. This resolution formalizes the application of AML/CFT obligations to entities involved in virtual asset activities, aligning Ecuador with FATF Recommendation 15.

This resolution also defines "Virtual Asset" and "Virtual Asset Service Provider" in line with FATF definitions.

Identification and Verification of Customer Identity:

Natural Persons: Obtain and verify full name, date of birth, nationality, identification number (e.g., cédula, passport), address, contact information, occupation/activity. Verification usually requires official documents.

Legal Entities: Obtain and verify legal name, registration number, date of incorporation, legal form, address of registered office, names of directors/partners/shareholders, and identification of individuals authorized to act on behalf of the entity. Verification requires official registration documents.

Identify and verify the identity of the natural persons who ultimately own or control the customer, or the natural person on whose behalf a transaction is being conducted. This is crucial for legal entities and trusts.

Purpose and Intended Nature of the Business Relationship:

Understand the reason for the customer's interest in VASP services and the expected type and volume of transactions.

Continuously monitor customer transactions and activities to ensure they are consistent with the VASP's knowledge of the customer, their business, and risk profile.

Regularly update customer information and documentation.

Develop and implement a risk assessment framework to identify, assess, and mitigate ML/TF risks.

Apply enhanced due diligence (EDD) for higher-risk customers (e.g., Politically Exposed Persons - PEPs, customers from high-risk jurisdictions, complex or unusually large transactions, new technologies and products that favor anonymity).

Apply simplified due diligence (SDD) for lower-risk customers/transactions where appropriate.

Reporting Obligation: Any transaction, attempted transaction, or activity that raises suspicion of money laundering or terrorist financing, regardless of the amount, must be reported.

No Tipping-Off: VASPs and their employees are prohibited from disclosing to the customer or any third party that a report has been or will be submitted to UAFE.

Reporting Mechanism: Reports are typically submitted through UAFE's electronic system (SARLAFT system).

Internal Policies: VASPs must have internal policies and procedures to identify, evaluate, and report suspicious transactions.

Transaction Records: All details of virtual asset transactions (e.g., amount, type of virtual asset, sender/recipient addresses, timestamps, fiat currency equivalents, transaction hashes).

Customer Identification Data: Records of all documents and information obtained during CDD and EDD processes (identification documents, beneficial ownership information, risk assessments).

Business Correspondence: Relevant correspondence with customers regarding transactions or relationships.

Internal Reports: Records of internal suspicious activity reports, analysis, and decisions made.

Duration: These records must generally be kept for a period of at least five (5) years from the date of the transaction or the end of the business relationship, whichever is later.

Internal Control System: VASPs must establish and maintain an internal control system for AML/CFT, including a designated compliance officer, regular training for employees, internal audits, and a manual of procedures.

Sanctions Screening: VASPs should implement procedures to screen customers and transactions against national and international sanctions lists.

Technology and Cybersecurity: Given the nature of virtual assets, robust cybersecurity measures are essential to protect customer data and prevent unauthorized access or manipulation of transactions.

Legal Basis: Resolution 014-2014-M (or its subsequent reiterations) issued by the Monetary and Financial Policy and Regulation Board (Junta de Política y Regulación Monetaria y Financiera) and implemented by the Central Bank of Ecuador (BCE). This resolution, dated July 28, 2014, effectively banned private cryptocurrencies, stating that they are not recognized as legal tender and cannot be used as a means of payment within the country.

Reference: While the original resolution is difficult to find directly linked in an official government portal, its implications are widely cited in official BCE communications and analyses of the Ecuadorian financial system. For example, the BCE frequently reiterates its stance.

Indirect Reference (BCE Stance): Many BCE press releases and reports discuss their position. A search on the BCE website for "criptomonedas" will often lead to articles reaffirming their stance, e.g., https://www.bce.fin.ec/index.php/boletines-de-prensa-archivo/item/924-el-banco-central-del-ecuador-no-autoriza-ni-prohibe-bitcoin-ni-otras-criptomonedas-privadas (Note: this specific press release from 2018 clarifies they don't prohibit Bitcoin but confirm it's not legal tender and cannot be used for payments in the regulated financial system, upholding the spirit of the 2014 resolution).

Implication: Any VASP (Virtual Asset Service Provider) seeking to operate legally within Ecuador to offer crypto services would be prohibited from doing so. Any individual or entity using crypto as a means of payment for goods or services in the formal economy would be in violation of this directive.

Ecuador, as a member state of the United Nations, is obligated to implement sanctions imposed by the UN Security Council (UNSC) under Chapter VII of the UN Charter. These sanctions primarily target terrorism financing, proliferation financing, and threats to international peace and security.

Compliance for VASPs: Any VASP (or entity acting like one) must screen against the UN Security Council Consolidated List to identify individuals and entities designated for asset freezes and other restrictions.

OFAC (U.S. Office of Foreign Assets Control) Sanctions:

OFAC sanctions have extraterritorial reach, particularly when transactions involve U.S. persons, the U.S. financial system, or U.S. dollar-denominated transactions. Even a non-U.S. VASP can be subject to OFAC sanctions if it facilitates transactions that touch the U.S. financial system or benefits sanctioned entities/individuals.

Compliance for VASPs: Requires screening against the Specially Designated Nationals and Blocked Persons (SDN) List and other OFAC lists (e.g., Sectoral Sanctions Identifications List). This involves robust KYC/AML checks, transaction monitoring, and IP blocking for sanctioned jurisdictions.

Similar to OFAC, EU sanctions apply to entities operating within the EU or those that interact with EU persons or the EU financial system. If an Ecuadorian VASP or individual engages in crypto transactions with EU counterparts, they must comply.

FATF Recommendations: While not a sanctions body, the Financial Action Task Force (FATF) sets global standards for AML/CFT, which directly inform sanctions compliance for VASPs. Ecuador is a member of GAFILAT (Grupo de Acción Financiera de Latinoamérica), an FATF-style regional body, and is committed to implementing FATF recommendations.

Recommendation 15: Specifically addresses virtual assets and VASPs, requiring them to be regulated for AML/CFT purposes, licensed or registered, and subject to oversight. It includes the "Travel Rule," requiring VASPs to obtain and transmit originator and beneficiary information for transactions above a certain threshold. Sanctions screening is an inherent part of AML/CFT compliance.

Identify Customers (KYC/CDD): Implement robust Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures.

Screen Against Lists: Continuously screen customers and beneficiaries of transactions against the UN, OFAC, and EU sanctions lists.

Monitor Transactions: Monitor transactions for suspicious activity, including patterns indicative of sanctions evasion or money laundering.

Report Suspicious Activity: Report any suspicious transactions or matches to sanctions lists to Ecuador's Financial Analysis Unit (Unidad de Análisis Financiero y Económico - UAFE).

The UAFE issues various resolutions and guides for reporting entities regarding AML/CFT, which implicitly cover sanctions screening as part of identifying high-risk individuals or entities. For example, Resolution UAFE-DG-2019-0010 (Norma de Prevención de Lavado de Activos y Financiamiento del Terrorismo) outlines obligations for various reporting entities.

OFAC: Prohibits most transactions (including crypto) with individuals, entities, and governments in comprehensively sanctioned jurisdictions (e.g., Cuba, Iran, North Korea, Syria, certain regions of Ukraine).

EU: Imposes restrictions on certain countries (e.g., Russia, Belarus, Syria, Venezuela in specific contexts).

UN: Often imposes arms embargoes, travel bans, and asset freezes against specific individuals, entities, and, in some cases, restrictions on trade with certain countries or regions.

Violation of the Crypto Ban: As cryptocurrencies are not recognized as legal tender, individuals or entities found using them for payments in the formal economy could face administrative sanctions from the Central Bank or financial regulators. If linked to illicit activities, penalties under the Código Orgánico Integral Penal (COIP) (Organic Comprehensive Criminal Code) could apply.

AML/CFT Violations: Failure to comply with UAFE regulations (e.g., not conducting KYC, not reporting suspicious transactions, not screening for sanctioned entities) can lead to significant administrative fines for financial institutions and other reporting entities. If linked to money laundering or terrorism financing, criminal charges under the COIP apply, with severe penalties including imprisonment.

COIP Reference: Articles 317 (Lavado de Activos - Money Laundering) and 327 (Financiamiento del Terrorismo - Terrorism Financing) carry substantial prison sentences and fines. https://www.funcionjudicial.gob.ec/index.php/component/docman/doc_download/468-codigo-organico-integral-penal-coip.html?Itemid=

OFAC: Can impose severe civil and criminal penalties, including massive fines (millions of dollars), imprisonment for individuals, and blocking of assets.

EU: Penalties vary by member state but typically include significant fines and imprisonment.

UN: While the UN itself doesn't impose penalties directly on individuals/entities, non-compliance can lead to countries being criticized, and the designated entities facing asset freezes and travel bans implemented by member states.

Ecuador implements UN Security Council Resolutions, meaning any entity in Ecuador is obligated to screen against the UN Security Council Consolidated List.

The UAFE, as Ecuador's FIU, provides guidance on AML/CFT, which includes screening for high-risk individuals and entities. This implicitly covers designated persons on international lists but is not an independent Ecuadorian "sanctions list" in the same vein as OFAC's SDN list.

For compliance purposes, any individual or entity in Ecuador involved in international crypto transactions must primarily rely on the global lists (UN, OFAC, EU) to avoid legal repercussions from those jurisdictions.

Legal Basis: Resolution 014-2014-M (or its subsequent reiterations) issued by the Monetary and Financial Policy and Regulation Board (Junta de Política y Regulación Monetaria y Financiera) and implemented by the Central Bank of Ecuador (BCE). This resolution, dated July 28, 2014, effectively banned private cryptocurrencies, stating that they are not recognized as legal tender and cannot be used as a means of payment within the country.