Bitcoin News Today: El Salvador Launches World's First Bitcoin-Only Banks Under New Legal Framework

El Salvador has taken a landmark step in the evolution of digital finance by approving legislation that allows banks to operate exclusively as Bitcoin-only institutions. Effective August 3, 2025, under the leadership of President Nayib Bukele, the country has become the first in the world to establish a legal framework for banks that offer services solely in Bitcoin to accredited investors, with a minimum capital requirement of $50 million per institution [1]. This legislative development, known as the Investment Banking Act, removes previous restrictions that prevented traditional banks from engaging directly with Bitcoin and paves the way for institutional-grade crypto services [2].

The move is part of a broader strategy to position El Salvador as a global hub for Bitcoin finance. Since recognizing Bitcoin as legal tender in 2021, the country has continued to implement policies that reinforce its commitment to digital assets, including ongoing Bitcoin purchases despite international pressure from institutions like the IMF [3]. With this new law, the government aims to attract global capital and increase institutional Bitcoin flows, signaling a fundamental shift in how digital assets are integrated into traditional financial systems [1].

The initial market response has been positive. Over $120 million in institutional investment has already been secured, and analysts predict that the initiative could lead to increased liquidity and staking flows for Bitcoin at the institutional level [2]. Juan Carlos Reyes, Chairman of the Central Reserve of El Salvador (CNAD), emphasized that the law enables banks with a Digital Asset Service Provider (PSAD) license to operate entirely in Bitcoin, offering services in both fiat and foreign currencies to sophisticated investors [2].

However, the initiative is not without caution. While the legislation could drive broader digital asset banking if policies expand, some global analysts have raised concerns about potential economic and social impacts [2]. The regulatory shift reflects El Salvador’s willingness to challenge traditional financial norms and could serve as a model for countries like Liechtenstein and Switzerland, which have already developed advanced crypto banking frameworks [2].

El Salvador’s approach to Bitcoin is also shaped by its domestic economic environment. The country has faced high inflation and currency instability, which has led to a push for digital alternatives that offer greater financial resilience and foreign investment opportunities [5]. The government’s decision to continue purchasing Bitcoin even under IMF loan conditions highlights its long-term vision for digital currency as a cornerstone of economic stability [3].

The emergence of Bitcoin-only banks may also influence corporate behavior, as the availability of institutional-grade Bitcoin services could encourage further adoption of crypto in the private sector [6]. Yet, the success of this initiative will ultimately depend on investor confidence, regulatory clarity, and the ability to manage the inherent volatility of Bitcoin [2].

By creating a legal framework that supports Bitcoin-centric banking, El Salvador is challenging the status quo and potentially setting a precedent for the future of digital asset management. As the first nation to allow investment banks to operate with Bitcoin at their core, the country is demonstrating both the risks and opportunities associated with integrating cryptocurrency into traditional financial systems [1].

Sources:

[1] AInvest https://www.ainvest.com/news/bitcoin-news-today-el-salvador-launch-world-bitcoin-banks-2025-2508/

[2] Cointelegraph https://cointelegraph.com/

[3] CryptoDnes.bg https://cryptodnes.bg/en/tag/bitcoin/page/13/

[5] Moneyweb https://www.moneyweb.co.za/moneyweb-crypto/in-land-of-25-inflation-crypto-is-starting-to-replace-money/

[6] The Advocate and Democrat https://www.advocateanddemocrat.com/news/national/article_c94da3e0-a609-53d0-81c1-20a292bc9b79.html