El Salvador Banks Can Now Hold Bitcoin

El Salvador has approved the Investment Banking Law, permitting investment banks to hold Bitcoin and other digital assets, offering crypto services to sophisticated investors, and fostering foreign investment in the nation.

The Investment Banking Law, recently enacted in El Salvador, distinguishes investment banks from commercial banks through separate regulatory frameworks. This legislation permits investment banks to incorporate Bitcoin (BTC) and other digital assets onto their balance sheets. These institutions can also provide cryptocurrency-related services to “sophisticated investors,” a designation comparable to accredited investors in the United States.

Juan Carlos Reyes, president of El Salvador’s Commission of Digital Assets (CNAD), the governmental crypto regulatory agency, clarified the provisions of the new law. He stated, “The new Investment Banking Law allows private investment banks to operate in legal tender and foreign currencies for ‘Sophisticated Investors’ and to engage in digital assets like Bitcoin with a Digital Asset Service Provider (PSAD) license. With a PSAD license, a bank could choose to operate entirely as a Bitcoin bank.”

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Proponents of the law assert that it aims to stimulate foreign investment within El Salvador, positioning the country as an emerging financial hub. Institutional investors have notably influenced El Salvador’s crypto adoption, as the Central American nation seeks to attract cryptocurrency companies and financial firms through its supportive regulatory environment. Critics, however, contend that the country’s BTC adoption and related regulatory policies primarily benefit the government and large businesses, with limited advantages for the average citizen.

El Salvador is also developing international partnerships to advance its crypto initiatives. Nayib Bukele, the President of El Salvador, met with Bilal Bin Saqib, Pakistan’s state minister of crypto and blockchain. Their discussion focused on strategies for nation-state-level Bitcoin adoption and energy policies designed to support crypto mining operations. Bin Saqib explained that this cooperation is fundamentally based on how emerging economies, both participating in International Monetary Fund (IMF) programs, can leverage technology and other financial instruments to achieve national growth.

Furthering international collaboration, the Central Bank of Bolivia, represented by acting president Edwin Rojas, signed a memorandum of understanding with El Salvador’s CNAD on July 30. This agreement aims to promote the utilization of cryptocurrencies as an alternative to conventional fiat currencies. The pact was established amid a currency crisis in Bolivia, characterized by a scarcity of U.S. dollars, which has complicated international trade. Tether CEO Paolo Ardoino noted that this situation has led to an increased use of U.S.-dollar-denominated stablecoins as a medium of exchange.

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