Proposed Reform for Banking Law

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 offer other financial services using Bitcoin alongside the US dollar. This initiative represents a significant move towards integrating cryptocurrency into the country's economic system.

Digital Asset Services

According to a local media report, the reform also aims to allow private banks to seek authorization for digital assets and Bitcoin services. It aims to create a legal framework for El Salvador's private investment bank, facilitating the flow of financial resources towards businesses and government projects.

Minimum Capital and Shareholders

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 with investment experience, assessing risks, and having 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.

Legislative Assembly Reception

The Legislative Assembly has received the reform proposal, but it has yet to be approved. This means that while the proposal has been put forth, it still requires legislative backing to become law. The reception and debate over this proposal will be crucial in determining its future.

El Salvador's Bitcoin Journey

Nayib Bukele positioned his country as a Bitcoin adoption leader by establishing BTC as El Salvador's legal tender in September 2021. The government is also currently mining Bitcoin using volcanic geothermal power.