Norma that Regulates Currency and Payment Systems

RESOLUTION No. JPRM-2023-014-M THE MONETARY AND REGULATORY POLICY BOARD

CONSIDERING:

That, Article 226 of the Constitution of the Republic of Ecuador prescribes that public servants and persons acting under state authority shall exercise only the competencies and powers attributed to them in the Constitution and the Law;

That, Article 227 ibidem states that the Public Administration constitutes a service to the community governed by principles of efficiency, quality, hierarchy, coordination, planning, among others;

That, numeral 1 of Article 302 ut supra determines that: “Monetary, credit, exchange, and financial policies shall have as objectives: 1. To supply the necessary means of payment so that the economic system operates efficiently. (…)”;

That, the first clause of Article 303 of the Magna Carta determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Function and will be implemented through the Central Bank of Ecuador;

That, Article 40 of the Organic Monetary and Financial Code states: “(…) Entities of the national financial system and those qualified within auxiliary payment systems will participate in the collection of public resources, through collector accounts in the name of non-financial public entities, in accordance with the regulations issued by the Monetary and Regulatory Policy Board. The balance of said accounts will be transferred to the accounts corresponding to the respective public institution at the Central Bank of Ecuador, in accordance with the regulation issued for this effect. (…)”;

That, Article 47.1 of the aforementioned Code created the Monetary and Regulatory Policy Board, as part of the Executive Function, responsible for the formulation of monetary policy, the highest governing body of the Central Bank of Ecuador, and determined its composition;

That, Article 47.6 of the same Code, regarding the functions of the Monetary and Regulatory Policy Board, among others, establishes: “1. Formulate policy in the monetary sphere and observe its application by the Central Bank of Ecuador, to preserve the integrity and sustainability of the dollarization monetary system and the financial system, in accordance with the provisions of this Code; (…) 12. Regulate the central payment system, as well as the regulation, permission, registration, surveillance, and supervision of auxiliary payment systems; (…) 25. Set the commissions and tariffs for services of the Central Bank of Ecuador; and, 26. Those others conferred by law. (…)”;

That, the first and fourth clauses of Article 94 of the aforementioned Code prescribe: “All transactions, monetary and financial operations, and their accounting records, carried out in the Republic of Ecuador, shall be expressed in United States dollars, in accordance with this Code. (…) The currency determined in this article is a means of payment. (…)”;

That, Article 97 ut supra provides: “The exchange of the currency referred to in Article 94, of any class or denomination, shall be carried out by the Central Bank of Ecuador, to the bearer and on sight, without charge of any nature, for currency of greater or lesser denomination requested. If the Central Bank of Ecuador temporarily does not have currency in the required denominations, it may deliver currency in values that most closely approximate those requested. National financial system entities are obligated to provide currency exchange services in accordance with the terms established by the Monetary and Regulatory Policy Board, with the exceptions that are determined”;

That, Article 99 of the aforementioned Code determines: “Means of payment are checks, electronic wallets, and electronic means of payment that include transfers for payment or collection, credit, debit, prepaid, reloadable or non-reloadable cards, deposit reserve and deposit insurance; electronic wallets with the category of fully digital banking that meet the liquidity reserves, deposit reserve, and deposit insurance requirements, and meet the liquidity reserves, and, other technology-centered means of payment, prior to license from the Superintendency of Banks and in the terms determined and regulated by the Monetary and Regulatory Policy Board”;

That, Article 101 of the same Code states: “Electronic means of payment will be implemented and operated by the Central Bank of Ecuador and operated by the entities of the national financial system and duly qualified agents of the auxiliary payment system in accordance with the regulations issued by the Monetary and Regulatory Policy Board in accordance with international standards on the regulation of electronic means of payment. All transactions carried out with electronic means of payment operated by those who perform Fintech Activities will be settled and, if applicable, compensated at the Central Bank of Ecuador, in accordance with the procedures established by the Monetary and Regulatory Policy Board. The use of electronic, telematic, or similar means of payment, implemented by the national financial system, will be encouraged, tending towards the reduction of costs for these and other services provided by said entities. All transactions carried out with electronic means of payment will be settled and, if applicable, compensated at the Central Bank of Ecuador, in accordance with the procedures established by the Monetary and Regulatory Policy Board”;

That, the first and second clauses of Article 103 of the aforementioned norm state: “The national payment system comprises the set of policies, norms, instruments, procedures, and services through which resource transfers managed through means of payment and the settlement of values between its various participants are effected, directly or indirectly. The national payment system is integrated by the central payment system and the auxiliary payment systems. The Central Bank of Ecuador will establish the authorization, operation, registration, and information disclosure requirements for these systems. The corresponding tariff regime will be regulated by the Monetary and Regulatory Policy Board. (…)”;

That, Article 104 of the aforementioned Code states: “The central payment system is the set of policies, norms, instruments, procedures, and services articulated and coordinated, under the responsibility of the Central Bank of Ecuador, through which resource transfers from its participants are effected, as well as their compensation and settlement. The Monetary and Regulatory Policy Board will establish the requirements and conditions for access to the central payment system”;

That, Article 105 of the aforementioned Code provides: “Auxiliary payment systems are the set of policies, norms, instruments, procedures, and services articulated and coordinated, public or private, authorized by the Central Bank of Ecuador, established to effect resource transfers, money remittances, or compensation between their various participants”;

That, the first clause of Article 108 ut supra establishes: “The Central Bank of Ecuador is the compensator and settler of resources in the central payment system and settler of resources in the auxiliary payment systems. These auxiliary systems, as well as the entities of the national financial system, will remit with the periodicity and in the manner determined by the Monetary and Regulatory Policy Board the details and results of the compensation processes to be settled. (…)”;

That, Article 109 of the aforementioned Organic Code determines: “The Central Bank of Ecuador will carry out the surveillance and supervision of the auxiliary payment systems and their administrative entities, as well as any payment infrastructure or monetary resource transfer infrastructure that acts in the market, to ensure the correct functioning of the channels, instruments, and means of payment processed through them. The Monetary and Regulatory Policy Board will adopt regulations to determine the operation, governance, risk control, and financial requirements that auxiliary payment systems and their administrative agencies must comply with. Administrators of auxiliary payment systems, including any payment infrastructure or monetary resource transfer infrastructure, for their operation must have authorization from the Central Bank of Ecuador, and are obligated to remit the information it requires and within the deadlines it determines. (...)”;

That, numerals four and five of Article 162 of the aforementioned norm establish: “The private financial sector is composed of the following entities: (…) 4. Technological financial services entities: are entities that develop financial activities centered on digital and electronic technology or that carry out activities that represent financial risk as determined by the Monetary and Financial Regulatory Board; unless they have a relationship with the payment system, whose regulation corresponds to the Monetary and Regulatory Policy Board and whose control corresponds to the Central Bank. 5. Specialized societies for deposits and electronic payments: are entities whose sole object is the receipt of resources for the exclusive purpose of facilitating payments and transfers of resources through authorized electronic means of payment; and, sending and receiving financial drafts in accordance with the regulation issued by the Monetary and Regulatory Policy Board. The requirements for their constitution will be regulated by the Monetary and Financial Regulatory Board, controlled by the Central Bank of Ecuador, who will be in charge of issuing the corresponding information in case of requiring supervision or sanction intervention by the Superintendency of Companies, Securities and Insurance with the Superintendency of Banks, Superintendency of Popular and Solidarity Economy, as appropriate, and who will be in charge of proceeding as the Law disposes. All provisions corresponding to technological financial services entities will apply to specialized societies for deposits and electronic payments”;

That, numeral two of Article 439.1 of the aforementioned Code establishes: “Technological financial services entities are companies that develop technology-centered financial activities, among which are the following: (…) 2. Neobanks: These are financial entities dedicated to offering banking intermediation services digitally in accordance with new technological advances. They must comply with all regulations and provisions corresponding to traditional banking activity. (…)”;

That, Article 5 of the Organic Law for the Development, Regulation and Control of Technological Financial Services (Fintech Law) establishes: “For the purposes of this Law, it will be understood that Fintech Activities imply the development, provision, use, or offer of: i) Technological infrastructures to channel means of payment; ii) Technological financial services; iii) Specialized societies for deposits and electronic payments; iv) Technological services of the securities market; and, v) Technological services of insurance”;

That, Article 7 of the aforementioned Law determines: “To exercise Fintech Activities in Ecuador, companies must comply with the following requirements: 7.1. Be duly constituted as national societies, or be authorized as branches of foreign companies in Ecuador. Additionally, authorization will be required for the provision of any of the Fintech Activities established in this Law, by the Superintendency of Banks, the Superintendency of Popular and Solidarity Economy, the Superintendency of Companies, Securities and Insurance, or the Central Bank of Ecuador, as appropriate. 7.2. The corporate object of the aforementioned national companies, or branches of foreign companies, will be specific and exclusive for the performance of Fintech Activities and may not contain activities other than those”;

That, Article 8 of the aforementioned Law states: “Fintech companies will be regulated by the Monetary and Regulatory Policy Board and the Monetary and Financial Regulatory Board, as appropriate; and, supervised and controlled by the Central Bank of Ecuador, the Superintendency of Companies, Securities and Insurance, the Superintendency of Banks, or the Superintendency of Popular and Solidarity Economy, within the scope of their competencies and according to the regulation issued for this effect”;

That, the First Transitional Provision of the Law provides: “Grant the Monetary and Financial Regulatory Board and the Monetary and Regulatory Policy Board one hundred eighty (180) days counted from the publication of the present Law in the Official Register, to develop secondary regulation that allows the application of what is provided in the present Law”;

That, Resolution No. JPRM-2022-005-M, of February 11, 2022, which contains the “Norm of Currency and Electronic Means of Payment”, regulates the provisions of currency, fractional currency exchange, and electronic means of payment;

That, Resolution No. JPRM-2022-010-M, of March 11, 2022, which contains the “Norm that Regulates Auxiliary Payment Systems”, reformed by Resolution No. JPRM-2022-019-M, of July 7, 2022, regulates all administrators of auxiliary payment systems (ASAP) and the services they provide to financial entities, financial users, and establishments;

That, numeral 6 of Article 3 of Section II “Participants and Components of the Central Payment System”; Section XII “Network of Networks System”; and, Section XIII “Shared Counter System” of Chapter I “Norms for the Central Payment System” of Resolution No. JPRM-2022-020-M, of August 4, 2022, which contains the “Monetary System Norms”, reformed by Resolution No. JPRM-2022-029-M, of November 29, 2022, contains the provisions on the network of networks system to channel in real time the instructions issued by the clients of the participating financial entities in the Central Payment System;

That, it is necessary to issue the norm that allows the application of the Organic Law for the Development, Regulation and Control of Technological Financial Services (Fintech Law) in compliance with what is provided in the First Transitional Provision of the aforementioned Law;

That, the Monetary and Regulatory Policy Board, through ordinary session No. 008-2023, under modalities presencial, on August 7, 2023, reviewed the proposal sent via memorandum No. BCE-BCE-2023-0186-M, of August 4, 2023, by the General Manager of the Central Bank of Ecuador to the President of the Monetary and Regulatory Policy Board, as well as the technical report No. BCE-SGSERV-2023-058/BCE-DNSP-2023-394/BCE-DNRO-2023-101, of August 2, 2023, and the legal report No. BCE-CGJ-051-2023, of August 3, 2023; and,

In exercise of its functions and in attention to Article 47.7 of the Organic Monetary and Financial Code, the Monetary and Regulatory Policy Board resolves to issue:

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NORM THAT REGULATES CURRENCY, MEANS AND PAYMENT SYSTEMS IN ECUADOR AND THE FINTECH ACTIVITIES OF ITS PARTICIPANTS

TITLE I - OF LEGAL TENDER CURRENCY

CHAPTER 1.- PRELIMINARY CONSIDERATIONS

Art. 1.- Means of payment. - Means of payment are those physical or electronic instruments, authorized by the Monetary and Regulatory Policy Board that, used among different economic agents, serve to carry out financial or economic transactions, with the purpose of, among others, acquiring goods, services, or canceling obligations. Means of payment are classified into: a. Physical means of payment; b. Electronic means of payment; and, c. Electronic Wallets.

CHAPTER 2.- PHYSICAL MEANS OF PAYMENT

SECTION I.- DETERMINATION:

Art. 2.- Physical means of payment. - Physical means of payment are banknotes, coins, and checks.

SECTION II.- FRACTIONAL CURRENCY EXCHANGE:

Art. 3.- Scope of application. - The provisions contained in this section are applicable to public banking with deposit-taking capacity, private banks, mutualists, and savings and credit cooperatives, who for the purposes of this section will be referred to as "financial entities"; as well as, for the Central Bank of Ecuador within the scope of its attributions and competencies.

Art. 4.- Currency exchange. - The Central Bank of Ecuador and financial entities will exchange at their counters, banknotes for fractional coins and vice versa, with the aim of satisfying the demand of the citizenry. The citizenry will receive in fractional coins an amount equal to that delivered to be exchanged. Financial entities will carry out the exchange during their usual hours of public attention, without discriminating whether or not it is a client or member of the entity. To carry out exchange activities and satisfy demand, financial entities will keep in their cash registers coins of various denominations in sufficient quantities. The exchange and distribution of fractional currency will be carried out in accordance with the needs of the citizenry. Exceptionally, in case they do not have currency in the required denominations, the Central Bank of Ecuador and financial entities may deliver coins in the denominations that most closely approximate those requested. The Central Bank of Ecuador may request from participants in the national payment system the information it requires regarding the characteristics of the demand for circulating currency.

CHAPTER 3.- ELECTRONIC MEANS OF PAYMENT

SECTION I.- DETERMINATION:

Art. 5.- Electronic means of payment. - The following are electronic means of payment: a. Electronic money transfers to make payments; b. Electronic money transfers to make collections; c. Credit cards; d. Debit cards; and, e. Prepaid, reloadable or non-reloadable cards.

SECTION II.- OPERATION:

Art. 6.- Operation. - Electronic means of payment will be operated by the Central Bank of Ecuador, by the entities of the national financial system, and by participants in the auxiliary payment system, according to their nature.

Art. 7.- Validity. - Payments made through electronic means cannot be repudiated, revoked, or left without effect. A payment is considered valid when the system operator, once the payment instruction has been received, has proceeded to communicate to the participating entities to proceed with the validation and confirmation of the instruction.

Art. 8.- Compensation and Settlement. - All transactions carried out with electronic means of payment will be settled and, if applicable, compensated at the Central Bank of Ecuador. The net results of the compensation processes will be settled at the Central Bank of Ecuador, through debits or credits to the accounts that participants in the Central Payment System maintain at said institution. The Central Bank of Ecuador will establish the conditions for the settlement of transactions carried out through the Central Payment System and Auxiliary Payment Systems.

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CHAPTER 4.- ELECTRONIC WALLETS

Art. 9.- Concept. - An electronic wallet is a means of payment that, through an electronic device or online service, allows the channeling of money in real time, through the use of electronic means of payment, facilitates payments and transfers, and allows sending and receiving financial drafts.

Art. 10.- Operation. - Electronic wallets will be operated exclusively by Specialized Societies for Deposits and Electronic Payments (SEDPES); by financial entities exclusively for transactions of their clients or members, and by auxiliary financial services agents with permission to administer and operate electronic wallets. Electronic wallets may operate with the electronic means of payment expressly authorized by the Central Bank of Ecuador.

Art. 11.- Availability. - The funds of electronic wallet holders, credited in their respective electronic payment accounts, will be available at all times, at the sole request of their holder and immediately. To this effect, the systems implemented by SEDPES and authorized financial entities must identify and individualize the funds and movements of each client and operate 24 hours a day, 7 days a week, 365 days a year.

Art. 12.- Maximum operation amounts. - Entities providing the electronic wallet service must allow their users to customize their maximum operation amounts. These entities must inform their users regarding transactional security measures.

CHAPTER 5.- CONTROL AND STATISTICS OF MEANS OF PAYMENT

Art. 13.- Control. - The Central Bank of Ecuador will carry out the control of means of payment.

Art. 14.- Publication of statistics. - The Central Bank of Ecuador will publish quarterly on the institutional website, the statistics of use of means of payment operating in the country.

Art. 15.- Obligation to send information. - Entities that operate or process means of payment must remit the information required by the Central Bank of Ecuador in the form and periodicity that it determines.

TITLE II - NATIONAL PAYMENT SYSTEM

Art. 16.- National payment system. - The national payment system comprises the set of policies, norms, instruments, procedures, and services through which resource transfers managed through means of payment and the settlement of values between its various participants are effected, directly or indirectly. The national payment system is integrated by the central payment system and the auxiliary payment systems. The Central Bank of Ecuador will establish the authorization, operation, registration, and disclosure requirements for these systems.

Art. 17.- Principles. - The National Payment System will be governed by principles of security, efficiency, transparency, stability, risk control, and interoperability.

CHAPTER 1.- CENTRAL PAYMENT SYSTEM

Art. 18.- Central Payment System. The central payment system is the set of policies, norms, instruments, procedures, and services articulated and coordinated, under the responsibility of the Central Bank of Ecuador, to a

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