El Salvador plans to promote the integration of Bitcoin into its banking system

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The government of El Salvador has presented a reform proposal to create a private investment bank. Notably, the proposed reform goals allow the bank to conduct operations in Bitcoin and US dollars, El Salvador’s ambassador to the United States, Milena Mayorga, said in a recent post.

In other words, under the new proposed law, the bank can accept deposits, make loans and potentially offer other financial services using Bitcoin alongside the US dollar.

Furthermore, according to a local media outlet, the reform aims to allow private banks to seek authorization for digital asset and Bitcoin services relationship.

The reform aims to create a legal framework for El Salvador’s private investment banking, facilitating the flow of financial resources to businesses and government projects. As noted, the bank would require a minimum capital of $50 million and could have foreign shareholders.

“[The private bank] they will only raise funds from so-called “sophisticated investors”, to whom they will also be able to lend if they present collateral,” the report notes. “In the reform bill, sophisticated investors are defined as those who have investment experience, evaluate risks and have freely available assets equivalent to $250,000 or $500,000.”

Furthermore, according to the report, compared to traditional banks, private investment banks would have fewer restrictions, such as eliminating the ban on foreign contracts with affiliated entities or eliminating limitations on loan concentration and credit exposure to an individual borrower.

The reform proposal has been received by the Legislative Assembly but has not yet been approved.

El Salvador has been at the forefront of Bitcoin adoption in recent years. In September 2021, the country was the first to adopt Bitcoin as legal tender.

Additionally, the country is mining Bitcoin using volcanic geothermal energy almost 474 Bitcoins mined starting May 15th.

Under the leadership of President Nayib Bukele, a strong supporter of Bitcoin, El Salvador should do so advance his pro-Bitcoin agendaexploring ways to increase Bitcoin adoption and usage in the future.

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