Bitcoin News Today: El Salvador Eyes World's First Bitcoin Banks Under New Law

El Salvador is advancing with the development of regulated Bitcoin investment banks, marking a key step in the country’s broader strategy to embed cryptocurrency into its financial infrastructure. The move follows the recent approval of the Investment Banking Law, which distinguishes investment banks from commercial banks and allows them to hold Bitcoin and other digital assets on their balance sheets. The law enables these banks to offer crypto services exclusively to “sophisticated” investors, a classification akin to accredited investors in the U.S. [1]

According to Juan Carlos Reyes, president of the Commission of Digital Assets (CNAD), banks can operate using legal tender and foreign currencies while also offering digital asset services under a Digital Asset Service Provider (PSAD) license. This license could allow institutions to function entirely as Bitcoin banks [1]. The initiative is intended to attract foreign investment and establish El Salvador as an emerging financial hub, particularly for institutions seeking a pro-crypto regulatory environment [1].

The law reflects a growing institutional interest in cryptocurrency within the country, with the government actively engaging in partnerships to support its digital finance ambitions. President Nayib Bukele recently met with Pakistan’s State Minister of Crypto and Blockchain to discuss national-level Bitcoin adoption and energy strategies for crypto mining [1]. Additionally, Bolivia’s central bank has signed a memorandum of understanding with CNAD to promote cryptocurrencies as an alternative to traditional fiat, particularly in response to the country’s limited access to U.S. dollars [1].

The proposed Bitcoin banks are expected to provide services denominated in Bitcoin and U.S. dollars, with an initial capital framework of $50 million reportedly under consideration [2]. While the government has not yet revealed the full structure or regulatory details, the National Bitcoin Office (ONBTC) has indicated that a 2025 launch is being discussed [2]. This timeline aligns with broader discussions on the feasibility and governance of Bitcoin-based financial services [3].

Despite the government’s optimism, the initiative faces challenges. The International Monetary Fund (IMF) has expressed concerns over the economic risks associated with El Salvador’s crypto policies, particularly given the lack of a detailed operational plan [4]. Experts highlight the importance of public adoption, infrastructure development, and the ability to attract international investment in determining the success of the project [6].

The introduction of Bitcoin-only banks could represent a global first, offering a new model for integrating digital assets into national financial systems. However, the initiative also raises questions about regulatory compliance, financial stability, and the long-term viability of a Bitcoin-based banking model in a country still navigating the complexities of digital finance [5].

El Salvador’s continued push toward a Bitcoin-centric economy underscores a strategic vision to position the country as a leader in digital financial innovation. Yet, the absence of clear regulatory frameworks and operational details leaves key uncertainties regarding how Bitcoin banking will coexist with existing financial structures and manage the inherent volatility of the cryptocurrency market [7].

Source: [1] Bitcoin investment banks coming to El Salvador — Gov regulator (https://cointelegraph.com/news/bitcoin-investment-banks-coming-el-salvador?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound)

[2] Bitcoin News Today: El Salvador Eyes World's First ...(https://www.ainvest.com/news/bitcoin-news-today-el-salvador-eyes-world-bitcoin-banks-50m-capital-framework-2508/)

[3] El Salvador Plans World's First Bitcoin Banks (https://coinpedia.org/news/el-salvador-plans-worlds-first-bitcoin-banks/)

[4] El Salvador says 'Bitcoin banks are coming to Bitcoin country' (https://www.cryptopolitan.com/el-salvador-bitcoin-banks-bitcoin-country/)

[5] El Salvador Teases Launch of World's First Bitcoin Bank (https://www.ccn.com/news/crypto/el-salvador-teases-launch-of-worlds-first-bitcoin-bank/)

[6] El Salvador set to roll out Bitcoin banks amid growing ... (https://cryptobriefing.com/el-salvador-bitcoin-banks-announcement/)

[7] Bitcoin Banks Coming to El Salvador: But What's the Full ... (https://coincentral.com/bitcoin-banks-coming-to-el-salvador-but-whats-the-full-plan/)