Nikolas Sargeant
El Salvador has enacted landmark legislation allowing licensed investment banks to hold Bitcoin directly on their balance sheets and offer cryptocurrency services to institutional clients. The law permits financial institutions with $50 million in capital to register as investment banks and obtain digital asset licenses, targeting accredited investors with assets exceeding $250,000.
The move cements the Central American nation's role as a global testing ground for merging traditional banking with cryptocurrency, while positioning the country as a digital finance hub and separating investment banking risks from commercial banking operations. The legislation represents a strategic pivot from El Salvador's previous retail-focused Bitcoin initiatives toward institutional investment attraction.
Under the new framework, investment banks can pursue a Digital Asset Service Provider license, enabling them to manage digital assets like Bitcoin as part of the government's strategy to attract foreign investment. The $50 million minimum capital requirement is designed to attract serious foreign investment and ensure financial stability, creating what regulators describe as fertile ground for institutional-grade cryptocurrency operations.
However, the legislation has drawn criticism from some quarters. Critics argue that Bitcoin adoption mainly benefits large businesses and the government rather than ordinary citizens, suggesting the law favors institutional players over retail users. This development follows El Salvador's decision to walk back mandatory Bitcoin acceptance requirements in early 2025 to secure a $1.4 billion IMF loan facility, signaling a more measured approach to cryptocurrency integration.
El Salvador's Bitcoin History
El Salvador became the first country to adopt Bitcoin as legal tender in September 2021, launching an ambitious digital currency experiment that has evolved significantly over time. The government has consistently accumulated Bitcoin holdings, with recent purchases adding to the nation's cryptocurrency reserves as part of President Nayib Bukele's long-term strategy.
The country's Bitcoin journey has faced challenges, particularly regarding international financial relationships. IMF restrictions and compliance requirements have forced policy adjustments, including the rollback of mandatory Bitcoin acceptance to secure crucial loan agreements. Despite these constraints, El Salvador continues exploring innovative cryptocurrency applications, including proposing a $10,000 cross-border crypto sandbox framework to regulators, demonstrating ongoing commitment to digital finance innovation while balancing international obligations.
