On-shore VASP in 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.

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.

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

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)

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

Issued: January 2022.

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.

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.

Beneficial Ownership (BO) Identification:

Purpose and Intended Nature of the Business Relationship:

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

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.

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).

Adopted: Yes, the FATF Travel Rule has been adopted in Ecuador.

Travel Rule Threshold: UAFE Resolution No. UAFE-DG-2023-0002 (Article 10) mandates the collection and transmission of originator and beneficiary information for virtual asset transfers that exceed the value of five hundred United States Dollars ($500 USD) or its equivalent in other currencies.

Information Collection: For transactions exceeding the $500 USD threshold, VASPs must obtain and maintain the following information (Article 10):

Record Keeping: VASPs are required to keep records of this information for at least 10 years (Article 11).

Administrative Sanctions: The UAFE, as the supervisory authority, can impose administrative sanctions on VASPs that fail to comply with their obligations (Article 33 of the Organic Law). These can include:

Taxable Events: Any gain derived from cryptocurrency is likely to be considered taxable income. This includes:

Individuals (Personas Naturales): Profits are added to other taxable income and subject to progressive income tax rates. These rates vary annually and are published by the SRI.

Businesses (Sociedades): Corporate profits, including those from cryptocurrency activities, are subject to the standard corporate income tax rate, which is generally 25% for most companies, though certain circumstances (e.g., reinvestment) can lead to reduced rates.

Servicio de Rentas Internas (SRI) - Official Tax Authority:

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.