20 July 2026
El Salvador Introduces First Bitcoin Regulatory Draft for Banks
El Salvador, the small Central American nation, has released the first regulatory draft for banks under the Bitcoin law.
After passing a bill on 9th June 2021 to make Bitcoin a legal tender, El Salvador created a historic move in the cryptocurrency space. The central bank of El Salvador, Banco Central de Reserva (BCR), has released the first draft policy for banks to engage in Bitcoin, which will come into force from 7th September 2021.
Banco Central de Reserva has issued two papers titled:-
- Guidelines for the Authorization and Operation of Digital Wallet Platforms for Bitcoin and Dollars
- Technical Standards for the Facilitation of the Bitcoin Law’s Application
The drafted proposal calls out banks to take the Central Bank’s authorization for offering Bitcoin-related services. Besides, the banks are also required to outline risks that the customer may face and plan to overcome them. While ensuring KYC, the payment service providers should offer bitcoin-to-dollar convertibility and vice versa.
“The purpose of these Regulations is to regulate the rights and obligations between commercial relationships between financial entities and providers that contract for the proper functioning of digital transactions and payments only with bitcoin or dollars through different electronic mechanisms,” states the Technical Standard paper.
The proposed draft regulations will be applied to:
- Digital Exchange Houses or Exchange for bitcoin and dollars
- Bitcoin and dollar digital wallets
- Payment service providers for bitcoin and dollars
- Any other agent in the value chain of the product or service related to these Standards, such as custodians and technology providers related to bitcoin.
The Latin American nations came across a lot of heat from credit rating companies and financial regulators across the globe. The IMF became the first to raise concerns over El Salvador’s move of adopting the highly volatile asset as a legal tender. Following that, Moody’s and Fitch also downgraded El Salvador’s credit rating and made it difficult for the country to seek loans from international banks and creditors.
Apart from all this, El Salvador’s President claims that Bitcoin adoption is done with an aim to bank the 70% unbanked population of El Salvador.
Disclaimer: The author’s views and opinions are for informational purposes only and do not constitute financial, investment, or other advice.
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