In a bid to revitalize El Salvador's dollarized, remittance-reliant economy, President Nayib Bukele in 2021 made bitcoin legal tender alongside the US dollar, though studies show uptake of the cryptocurrency has been slow
President Nayib Bukele is known in the crypto space for his commitment toward encouraging wider Bitcoin adoption in El Salvador. AFP

KEY POINTS

  • The draft reform states that BPIs will facilitate the channeling of financial resources toward business and government projects
  • BPIs can apply as a digital asset service provider and should operate using 'any legal tender'
  • Bukele is known for championing Bitcoin even as the digital currency has had price downturns

El Salvador, which is known for its huge support for Bitcoin, has proposed the establishment of a Bank for Private Investment (BPI) that will offer services for both fiat and BTC users.

Milena Mayorga, El Salvador's ambassador to the United States, recently announced a proposed reform to the country's Banking Law on X (formerly Twitter) that would establish BPIs. Her post was accompanied by a link to a report by the local daily newspaper El Mundo wherein more details about the proposal were revealed.

The draft proposal, which was crafted by President Nayib Bukele's administration, deems private investment banking as a tool that "facilitates the efficient channeling of financial resources towards business and government projects," as per a Google translation of the report.

BPIs should be established with a minimum share capital of $50 million, as well as a minimum of two shareholders – foreigners or Salvadoran citizens. The banks' fundraising activities are limited to so-called "sophisticated investors," who may also apply for loans if they present the necessary collateral.

The proposed reform that could establish BPIs in the country further notes that the banks should operate using "any legal tender" and will have the opportunity to apply as a digital asset service provider or Bitcoin service provider. El Salvador became the first nation to approve BTC, which has been on a price downturn in recent weeks, as legal tender in 2021.

Bitcoiners and cryptocurrency users on X have had mixed reactions to the news, though most believe the development could be a game-changer for Bukele's long-term goals for Bitcoin in his country.

A crypto advisor who goes by Coach K said that if the proposed reform is approved, it could be "huge." On the other hand, it "needs a lot of planning" too. One user said the development could propel El Salvador "ahead of the planet," and another pointed out how innovations around the world's largest cryptocurrency were being "made in El Salvador."

"El Salvador will be one of the leading countries in 10-15 years. And most of its citizens will be millionaires, it's crazy," one user said.

News of the proposal to establish BPIs comes about two weeks after Bukele secured the presidency for a second term in a landslide victory. While he is known in the crypto space as a champion for Bitcoin, he is more recognized worldwide as the leader who has implemented a brutal crackdown on criminal gangs across the country.

El Salvador has been on a Bitcoin buying spree since mid-November 2022, when Bukele said the country would purchase one BTC daily. As of late March, the country's Bitcoin holdings reached over 5,700 worth some $372.8 million, based on current prices.

Read more