El Salvador plans to advance Bitcoin integration into its banking system
The proposed reform to El Salvador’s Banking Law aimed at promoting economic growth and financial system competitiveness.
The government of El Salvador has submitted a reform proposal to create a private investment bank. Notably, the proposed reform targets enabling the bank to conduct operations in Bitcoin and the US dollar, said El Salvador’s Ambassador to the US, Milena Mayorga, in a recent post.
In other words, under the new law proposal, the bank can accept deposits, make loans, and potentially offer other financial services using Bitcoin alongside the US dollar.
In addition, the reform aims to allow private banks to seek authorization for digital asset services and Bitcoin services, according to a local media report.
The reform aims to create a legal framework for El Salvador’s private investment bank, facilitating the flow of financial resources towards businesses and government projects. As noted, the bank would require a minimum capital of $50 million and could have foreign shareholders.
“[The private bank] will only raise funds from so-called ” sophisticated investors “, to whom they will also be able to give loans if they present a guarantee,” the report noted. “Sophisticated investors are defined in the reform bill as those who have investment experience, assess risks and have freely available assets equivalent to $250,000 or $500,000.”
Additionally, compared to traditional banks, private investment banks would have fewer restrictions, such as lifting the prohibition on foreign-related contracts with affiliated entities or removing limitations on loan concentrations and credit exposure to a single borrower, according to the report.
The reform proposal has been received by the Legislative Assembly but has not yet been approved.
El Salvador has been at the forefront of Bitcoin adoption over the past few years. In September 2021, the country became the first to adopt Bitcoin as its legal tender.
Additionally, the country is mining Bitcoin using volcanic geothermal power, with nearly 474 Bitcoin mined as of May 15.
Under the leadership of President Nayib Bukele, a strong supporter of Bitcoin, El Salvador is expected to advance its pro-Bitcoin agenda, exploring ways to increase Bitcoin’s adoption and use in the future.