El Salvador Allows Fully Bitcoin-Based Banks, Targeting High-Value Investors Over $250K
El Salvador has embarked on a groundbreaking Bitcoin-centric financial strategy with the recent passing of a new Investment Banking Law. This law now permits licensed private investment banks to operate exclusively in BTC, serving sophisticated investors with a minimum of $250,000 in liquid assets. The primary objective is to attract international financial entities and boost El Salvador’s standing in the global digital asset market.
What distinguishes this law is the creation of a new category of Bitcoin investment banks, differentiating them from commercial banks. These institutions are granted a more flexible regulatory framework to engage in robust corporate finance activities, hold and trade Bitcoin, and more. They must maintain a capital of at least $50 million and are eligible to apply for a Digital Asset Service Provider (PSAD) license. With this license, they can offer various services in Bitcoin, tokenized assets, USD, gold, and other approved assets. These banks will be able to underwrite securities, manage assets, structure corporate transactions, engage in cross-border financing, and maintain digital assets directly on their balance sheets.
The main focus of these Bitcoin-centric banks is to serve institutional and high-net-worth clients. The services are limited to knowledgeable investors with substantial market experience, capable of managing complex financial risk. The $250,000 liquid asset threshold includes a range of eligible assets like Bitcoin, treasury bonds, tokenized assets, and fiat. This exclusive approach is similar to the accredited investor protection strategy in the U.S., positioning this banking model as an institutional-grade financial solution rather than catering to retail markets.
This legislative move is crucial for the adoption of Bitcoin as a primary digital currency in El Salvador. It marks a significant departure from its previous emphasis on retail adoption through the Chivo wallet and creates the potential for large-scale capital inflows that could drive institutional demand for Bitcoin. President of the Commission of Digital Assets (CNAD), Juan Carlos Reyes, has indicated that licensed banks could opt to operate entirely as Bitcoin banks, solidifying BTC’s role as a legal tender in the country and signaling to the global financial community that Bitcoin banking can be fully regulated and integrated into national financial systems.
Furthermore, this law is part of a broader strategy to strengthen global crypto partnerships. Recent interactions with countries like Pakistan and Bolivia demonstrate El Salvador’s commitment to integrating Bitcoin into the international financial realm. By promoting cryptocurrency use as an alternative to traditional currencies, El Salvador is positioning itself as a key player in the global digital financial landscape.
To ensure regulatory oversight and effective risk management, these new Bitcoin-based banks will be regulated by the Central Reserve Bank (BCR) to meet regulatory standards such as capital thresholds, liquidity ratios, and risk management of digital asset operations. The Financial System Superintendency (SSF) will conduct compliance audits and monitor transparency to protect investors and maintain market integrity. These measures aim to instill confidence in global investors conducting business in El Salvador’s crypto-friendly environment, ensuring safety and legality in the rapidly evolving digital asset market.
