El Salvador created history on June 9 this year after passing a bill to make Bitcoin a legal tender. The small Central American nation has now released the first regulatory draft for banks under the Bitcoin law that is set to come into force from September 7. Banco Central de Reserva (BCR), the Central Bank of El Salvador released the first draft policy for banks to engage in Bitcoin.
The central bank released two papers
- Guidelines for the Authorization and Operation of Digital Wallet Platforms for Bitcoin and Dollars
- Technical Standards for the Facilitation of the Bitcoin Law’s Application
The draft proposal requires banks to take the central bank’s authorization for offering Bitcoin-related services. The banks are also required to outline risks that the customer may face and plan to overcome them. The payment service providers must offer bitcoin-to-dollar convertibility and vice versa while ensuring KYC. The technical standard paper read,
“The purpose of these Regulations is to regulate the rights and obligations between commercial relationships between financial entities and providers that contract for the proper functioning of digital transactions and payments only with bitcoin or dollars through different electronic mechanisms.”
The proposed regulations will apply to
- Bitcoin and dollar digital wallets
- Digital Exchange Houses or Exchange for bitcoin and dollars
- Payment service providers for bitcoin and dollars
- Any other agent in the value chain of the product or service related to these Standards, such as custodians and technology providers related to bitcoin.
El Salvador Set to Implement Bitcoin Law Despite Growing Scrutiny
The Latin American nation has faced a lot of heat from global financial regulators and credit rating companies. IMF was the first to raise concerns over Salavador’s adoption of a highly volatile asset as a legal tender and how it can harm financial stability. Moody’s and Fitch have also downgraded El Salvador’s credit rating, making it difficult for the country to seek loans from international banks and creditors.
El Salvador’s President maintains that Bitcoin adoption was done in view to bank the 70% unbanked population of the country.