El Salvador’s Bitcoin banking plan targeted sophisticated investors

On June 15, 2024, El Salvador’s proposed framework for private investment banks emerged as a significant extension of the country’s Bitcoin policy. The draft would create a specialized class of bank serving investors with substantial assets, permit operations in any legal tender—including the U.S. dollar and bitcoin—and allow those institutions to seek authorization as digital-asset or Bitcoin service providers.

The verified development was a legislative proposal, not the establishment of a bank. The government submitted the initiative to the Legislative Assembly during its June 11 plenary session. The Assembly’s Technology, Tourism and Investment Commission received and read it on June 13 without debating or voting on the measure. Salvadoran Ambassador to the United States Milena Mayorga promoted the plan on June 14, and cryptocurrency-sector reporting dated June 15 brought its Bitcoin provisions to a wider audience.

That chronology matters. No institution had received a charter under the proposed framework by June 15, and the Legislative Assembly had not approved the reform.

A bank for a limited investor class

The draft defined private investment banks as Salvadoran variable-capital corporations with an indefinite duration and at least two shareholders, who could be foreign. Each bank would require minimum paid-in capital of $50 million.

Their customers would be limited to “sophisticated investors.” Contemporaneous accounts of the draft described qualifying individuals and entities as having investment knowledge, the ability to evaluate and absorb risk, and freely available assets meeting thresholds of $250,000 or $500,000, depending on the applicable route and customer type.

Those thresholds show that the proposal was not primarily a retail financial-inclusion program. Its intended market consisted of wealthy individuals, companies and other large investors capable of financing business or government projects. The government presented that narrower model as a way to attract international capital and increase the financial system’s competitiveness.

Bitcoin access with a different regulatory perimeter

The proposal’s cryptocurrency significance came from two provisions. First, the banks could conduct permitted operations in any Salvadoran legal tender. Because bitcoin and the U.S. dollar both had legal-tender status under the law then in force, the draft contemplated banking activity denominated in either instrument.

Second, a private investment bank could apply for authorization to provide digital-asset and Bitcoin services. That language did not make every proposed bank a licensed cryptocurrency company automatically. Separate authorization and technical rules from the relevant Salvadoran authorities would still have been required.

The draft also proposed exemptions from several restrictions applicable to commercial banks. Contemporaneous reporting said the specialized institutions would not face the ordinary 25% single-borrower exposure limit, the 10% limit covering certain foreign credit, or the requirement that at least 51% of specified bank ownership be Salvadoran or Central American. It also contemplated greater freedom for transactions with foreign financial companies connected to shareholders or their corporate groups.

Those provisions offered flexibility but raised unresolved concentration, related-party and supervisory questions. The available record did not demonstrate how prudential safeguards, anti-money-laundering controls, custody requirements or bitcoin price volatility would be handled in implementing rules.

Why the proposal mattered

El Salvador had already made bitcoin legal tender in September 2021 and enacted a separate digital-asset issuance regime. The banking proposal sought to connect that policy with regulated financial intermediation for large investors rather than leaving bitcoin activity solely to wallets, exchanges and specialized digital-asset providers.

Its institutional importance therefore lay in the attempted bridge between cryptocurrency policy and conventional banking law. It did not prove investor demand, guarantee that a bank would be formed or establish that bitcoin lending and collateral arrangements would be safe or commercially viable.

Later legislative context

On June 28, 2024, the Legislative Assembly publicly confirmed that its commission had begun studying the reform and restated the $50 million capital requirement, two-shareholder minimum and sophisticated-investor limitation. That later confirmation supports the proposal’s contents but must not be mistaken for evidence that the framework was enacted on June 15.