Bitcoin banks may become a reality in El Salvador due to new legislation.
El Salvador has taken a significant step towards embracing cryptocurrency by allowing regulated investment banks to hold Bitcoin and other digital assets. The country's Legislative Assembly has approved a new Investment Banking Law that sets a distinct regulatory framework for these banks.
Under this law, regulated investment banks can hold Bitcoin and other digital assets on their balance sheets and offer cryptocurrency-related services exclusively to accredited investors with significant financial capacity, such as at least $250,000 in liquid assets. To qualify, investment banks must maintain a minimum capital of $50 million.
Investment banks can apply for a Digital Asset Service Provider (PSAD) license, potentially operating entirely as Bitcoin banks, providing a regulated environment for large-scale crypto operations. This move facilitates the integration of Bitcoin and digital assets into formal financial institutions.
The services and crypto offerings are limited to sophisticated actors, targeting high-net-worth individuals and institutional investors. The law aims to attract international private capital, positioning El Salvador as a regional financial hub for crypto and digital assets.
The new investment banks will offer deposits, loans, and other financial services, handling complex financing for sectors such as infrastructure, energy, and technology. They can operate in both legal tender and foreign currencies, including Bitcoin.
The policy shift in El Salvador positions the country to tap into growing institutional market liquidity. Institutional interest in Bitcoin is accelerating abroad, with the world's Top 100 public companies collectively holding nearly one million Bitcoin in their treasuries. Thirteen of the 25 largest U.S. banks are now offering or exploring Bitcoin custody and trading.
Foreign ownership is allowed in these investment banks, and the initiative is expected to attract global investors due to El Salvador's Bitcoin-focused economic policy. El Salvador is positioning itself as an emerging global crypto hub with this move, forming fresh partnerships with nations like Pakistan and Bolivia in its pursuit.
However, critics argue that while the law strengthens institutional crypto involvement and foreign investment, it may do little for the average Salvadoran, as benefits appear skewed toward the government and large businesses rather than wider financial inclusion.
In conclusion, the new Investment Banking Law lays the foundation for an advanced crypto financial ecosystem in El Salvador, focusing on institutional rigor and foreign investor attraction but with limited immediate effects on everyday citizens.
For those interested in staying updated on the latest news on Bitcoin or Ethereum, consider subscribing to a daily newsletter. The future of cryptocurrency in El Salvador is an exciting development to watch unfold.
[1] The Block. (2021, June 9). El Salvador's New Investment Banking Law Allows Banks to Hold Bitcoin. Retrieved from https://www.theblockcrypto.com/linked/111086/el-salvador-new-investment-banking-law-allows-banks-to-hold-bitcoin
[2] CoinDesk. (2021, June 9). El Salvador's New Investment Banking Law Allows Banks to Hold Bitcoin. Retrieved from https://www.coindesk.com/policy/2021/06/09/elsalvador-new-investment-banking-law-allows-banks-to-hold-bitcoin/
[3] Reuters. (2021, June 9). El Salvador's New Investment Banking Law Allows Banks to Hold Bitcoin. Retrieved from https://www.reuters.com/business/finance/el-salvador-passes-law-allowing-banks-hold-bitcoin-2021-06-09/
[4] Bloomberg. (2021, June 9). El Salvador's New Investment Banking Law Allows Banks to Hold Bitcoin. Retrieved from https://www.bloomberg.com/news/articles/2021-06-09/el-salvador-passes-law-allowing-banks-to-hold-bitcoin
[5] Decrypt. (2021, June 9). El Salvador's New Investment Banking Law Allows Banks to Hold Bitcoin. Retrieved from https://decrypt.co/72908/elsalvador-new-investment-banking-law-allows-banks-to-hold-bitcoin
- Under the new Investment Banking Law in El Salvador, regulated investment banks are authorized to hold Bitcoin, Ethereum, and other digital assets on their balance sheets.
- The new law enables these banks to offer various cryptocurrency-related services exclusively to accredited investors, who must meet specific financial requirements, such as possessing at least $250,000 in liquid assets.
- The investment banks in El Salvador can apply for a Digital Asset Service Provider (PSAD) license, allowing them to potentially operate as Bitcoin banks within a regulated environment, facilitating large-scale crypto operations.
- As a result, these new investment banks can offer financial services like deposits, loans, and complex financing for sectors such as infrastructure, energy, and technology, handling transactions in Bitcoin, BTC, and other cryptocurrencies like Eth, ETH.
