El Salvador Crypto Law Allows Bitcoin Investment Banking Boosting Bitcoin Ante in South America

Beyond ATMs: El Salvador Proposes Bitcoin Investment Banking

Bitcoin adoption is poised for a new surge in El Salvador. The Salvadoran government has proposed a reform to the banking law, introducing a new type of bank that can offer Bitcoin and cryptocurrency services.

Comisión de tecnología, turismo e inversión se reúne hoy para conocer propuesta de reforma a Ley de Bancos para promover el trabajo de bancos de inversión privada en el país. Asamblea no ha compartido la pieza de correspondencia públicamente aún. pic.twitter.com/T0nbzZZPTk

— LPGPolitica (@LPGPolitica) June 13, 2024

On June 13, the banking bill reform was presented to the Technology, Tourism, and Investment Commission of the National Assembly. The proposal includes 14 new articles defining Private Investment Banks (PIB) as essential instruments that promote economic development and channel financial resources into business and government projects.

If approved, this initiative will enable the establishment of banks that can provide various services such as economic risk management, financial product purchases, investment management, hedging, and other financial derivatives. These services will support any legal tender in El Salvador, including the US dollar and Bitcoin.

Bitcoin Banks for the Wealthy Aim for Growth

The bill also explicitly supports instruments based on stablecoins, paving the way for crypto-based investment options. However, the requirements for establishing a Private Investment Bank (PIB) are stringent, with companies needing a capital of $50 million at inception.

Additionally, these banks will not cater to all Salvadorans; their services will be aimed at “sophisticated investors.” Such investors must demonstrate ownership of at least $250,000 in assets and pass a bank-specific knowledge test, or show ownership of $500,000 in assets.

Despite these requirements, the Salvadoran government believes that these institutions are crucial for the country’s economic progress. In a press release, the government emphasized the importance of developing a regulatory framework that promotes and facilitates the establishment and operation of PIBs to foster economic growth.

Offline Storage for National Holdings

In March this year it was announced that El Salvador plans to transfer a substantial portion of its Bitcoin holdings to an offline device, which will be securely stored in a physical vault within the country.

“We’ve decided to transfer a big chunk of our Bitcoin to a cold wallet and store that cold wallet in a physical vault within our national territory,” Bukele, who was re-elected last month for a second term, stated in a post on X. “It’s not much, but it’s honest work.”

We've decided to transfer a big chunk of our #Bitcoin to a cold wallet, and store that cold wallet in a physical vault within our national territory.

You can call it our first #Bitcoin piggy bank 🇸🇻

It's not much, but it's honest work 😂 pic.twitter.com/dqzedykxT1

— Nayib Bukele (@nayibbukele) March 14, 2024

In September 2021, El Salvador made history by becoming the first country to adopt Bitcoin as legal tender, placing it on equal footing with the US dollar. Concerning the initiative to transfer a significant portion of the country’s Bitcoin assets to an offline wallet, President Nayib Bukele remarked, “It’s not much, but it’s honest work.”

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About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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