Bitcoin Banking: El Salvador Drafts Law to Expand Crypto Adoption

• El Salvador proposes a draft reform to the Banking Law to enhance economic growth.
• The reform includes allowing private investment banks to operate using Bitcoin and other legal tenders.
• El Salvador holds 5,781 BTC valued at over $376M with a $67.33M profit.

El Salvador, the first country to adopt Bitcoin as legal tender, is considering a draft law that could further integrate the cryptocurrency into its banking system. The proposed legislation would allow for the creation of private investment banks that can operate with Bitcoin and other digital assets.

Milena Mayorga, El Salvador’s ambassador to the United States, recently tweeted about this development on X (formerly Twitter).

As part of our economic plan for El Salvador, we propose a BPI, Bank for Private Investment, where we can diversify the financing options offered to potential investors in Dollars and #Bitcoin. #BitcoinBank#EconomicFreedom https://t.co/3hfwVvTSeX

— Milena Mayorga (@MilenaMayorga)
June 14, 2024

One key provision of the reform bill is the creation of private investment banks that can operate with Bitcoin and other digital assets. These banks would be permitted to operate in any legal tender, including the U.S. dollar and Bitcoin, and could even request authorization to provide digital asset services.

The proposed law would also ease certain restrictions on private investment banks, allowing them to operate with greater flexibility and freedom. For example, they would not be subject to the same prohibitions on entering into contracts with foreign banks or financial companies as traditional banks.

To qualify as sophisticated investors, individuals would need to have investment experience, be able to assess risks, and have freely available assets worth $250,000 or $500,000. Private investment banks would only be able to raise funds from these sophisticated investors and would be allowed to provide loans to them if they offered a guarantee.

While the draft reform marks a significant milestone, it has yet to receive approval. Moreover, the legislators have neither called officials to discuss the project’s objectives nor put it to a vote in the Commission.

This latest initiative is part of a broader effort to integrate Bitcoin into El Salvador’s banking system. The country adopted Bitcoin as legal tender in September 2021 and has continued to invest in the asset.

According to official records endorsed by President Nayib Bukele, El Salvador holds 5,781 BTC tokens currently valued at over $376 million, with an unrealized profit exceeding $67.33 million.

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