The objective of the proposed modifications to El Salvador’s Banking Law was to enhance the competitiveness of the financial system and stimulate economic development.
In order to establish a private investment bank, the government of El Salvador has submitted a reform proposal. Milena Mayorga, El Salvador’s Ambassador to the United States, recently stated that the proposed reform prioritizes the bank’s ability to operate in both the US dollar and Bitcoin.
In other words, the potential for the bank to offer additional financial services, make loans, and receive deposits using Bitcoin in conjunction with the US dollar is present under the new law proposal.
According to a local media report, the reform also intends to enable private institutions to request authorization for Bitcoin services and digital asset services.
The reform’s objective is to establish a legal framework for El Salvador’s private investment bank, thereby facilitating the movement of financial resources toward government initiatives and businesses. As previously mentioned, the bank would be required to maintain a minimum capital of $50 million and may have foreign shareholders.
“[The private bank] will only solicit funds from “sophisticated investors,” who will also be eligible for loans provided they provide a guarantee,” the report stated. “The reform measure defines sophisticated investors as individuals who possess investment experience, are capable of evaluating risks, and possess assets that are freely available, equivalent to $250,000 or $500,000.”
In addition, the report stated that private investment banks would be subject to fewer regulations than traditional banks. These regulations would include the removal of restrictions on loan concentrations and credit exposure to a single borrower, as well as the relief of the prohibition on foreign-related contracts with affiliated entities.
While the Legislative Assembly has acknowledged receipt of the reform proposal, it has yet to authorize it.
The adoption of Bitcoin has been at the forefront in El Salvador for the past few years. The country was the first to approve Bitcoin as its legal tender in September 2021.
Furthermore, the nation is employing volcanic geothermal power to mine Bitcoin, with nearly 474 Bitcoin mined as of May 15.
El Salvador is anticipated to further its pro-Bitcoin agenda, which includes the exploration of methods to increase the adoption and use of Bitcoin in the future, under the leadership of President Nayib Bukele, a strong supporter of Bitcoin.
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