El Salvador is doubling down on its Bitcoin experiment. Three years after making Bitcoin legal tender, the nation is now courting high-net-worth individuals and institutional investors with a new banking law. This move aims to solidify El Salvador's position as a regional financial hub for digital assets.
New Investment Banking Law
The Legislative Assembly recently approved the Investment Banking Law. This law allows licensed institutions with a minimum of $50 million in capital to offer Bitcoin and other digital asset services. However, access is restricted to "sophisticated investors" – those with at least $250,000 in readily available funds and proven financial knowledge.
According to lawmaker Dania González, the goal is to attract international private capital, enabling funds and high-net-worth individuals to establish operations in the country or utilize Salvadoran entities as regional platforms. Investment banks meeting the capital threshold can issue bonds, arrange public-private partnerships, and provide or issue digital assets, including Bitcoin.
Bukele's Continued Push for Crypto
This development coincides with President Nayib Bukele's consolidation of power. Recent constitutional changes extend presidential terms and abolish term limits, potentially allowing Bukele, a self-proclaimed Bitcoin evangelist, to remain in office for decades.
Regulatory Landscape and Institutional Investment
Juan Carlos Reyes, president of El Salvador’s Commission of Digital Assets (CNAD), stated that the new law allows private investment banks to operate in legal tender and foreign currencies for sophisticated investors and 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.
Proponents believe the law will encourage foreign investment and establish El Salvador as a burgeoning financial hub. Institutional investors have significantly contributed to El Salvador's crypto adoption, attracting crypto companies and financial firms due to its pro-crypto regulatory environment.
However, critics argue that Bitcoin adoption and related regulatory policies primarily benefit the government and large businesses, rather than the average Salvadoran citizen.
International Partnerships
President Bukele recently met with Bilal Bin Saqib, Pakistan’s state minister of crypto and blockchain, to discuss strategies for nation-state crypto adoption, further demonstrating El Salvador's commitment to its digital asset strategy.