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El Salvador Launches Investment Banking Law to Boost Cryptocurrency Integration
El Salvador is set to reshape its financial landscape with the recent passage of its Investment Banking Law, allowing banks with a capital of over US$50 million (approximately AU$76.74 million) to offer cryptocurrency services to qualified investors. This revolutionary legislation aims to integrate digital assets like Bitcoin into the country’s traditional banking system.
Key Provisions of the New Law
- Eligibility Criteria: Only banks with a minimum capital of US$50 million can provide cryptocurrency services.
- Target Investors: The law primarily caters to "sophisticated investors," defined as those with liquid assets exceeding US$250,000 (about AU$383,700), which can include Bitcoin.
- Expanded Services: Licensed banks can hold Bitcoin, issue tokens, and develop regulated crypto-backed investment products, allowing for a seamless blend of traditional and digital finance.
The new legal framework enables these banks to expand their operations by holding cryptocurrencies and offering innovative financial products. According to Representative Dania González, this initiative creates an additional regulated category of banking, complementing the current financial infrastructure in El Salvador.
Enhancing the Financial System
Representative González emphasised the significant benefits this move could usher in for the Salvadoran economy. The established regulatory body will ensure that the new banks operate within a framework similar to the traditional banking system while expanding its capabilities.
“Another benefit is the financing of the financial system, since the institutional architecture of the Salvadoran financial system will be expanded as a new, but regulated and supervised entity, complementary to the traditional banking system we all know,” noted González.
Aiming for Foreign Investment
Juan Carlos Reyes, president of the Commission of Digital Assets in El Salvador, highlighted that with the appropriate licences, these banks could function entirely as Bitcoin banks. This approach includes conducting transactions in both legal tender and foreign currencies, aiming to attract foreign investment and enhance the country’s status as a regional finance hub. The move represents a strategic pivot away from El Salvador’s previous retail-centric Bitcoin initiatives, focusing instead on attracting institutional capital.
The law enables these investment banks to facilitate a range of services, such as fundraising, extending credit, organising foreign exchange transactions, and establishing guarantees. González mentioned that this framework could boost major infrastructure projects, product launches, and international ventures, involving transactions in Bitcoin, stablecoins, gold, and tokenised bonds.
Moving Beyond Initial Strategies
This legislative change marks a clear departure from El Salvador’s past Bitcoin strategy, which primarily focused on retail engagement. Following a significant US$1.4 billion (AU$2.15 billion) loan agreement with the International Monetary Fund (IMF) in 2025, public-sector Bitcoin initiatives saw a decline. The IMF suggested that, despite the government’s claims of regular Bitcoin acquisitions, no new purchases had occurred since the agreement, with recent financial movements merely reflecting the consolidation of existing holdings.
In conclusion, El Salvador’s new Investment Banking Law signifies a pivotal moment for the country as it seeks to diversify and enhance its financial system. By integrating cryptocurrency services within traditional banking parameters, the country not only aims to solidify its domestic market but also to attract significant foreign investments in digital assets.
