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After revealing plans to adopt Bitcoin as a legal tender, El Salvador made history earlier this year. This initiative also inspired other countries that are now aiming for financial independence.
The idea was presented by Salvadoran President Nayib Bukele. He has faced plenty of challenges along with opposition from political parties in the country. Despite the difficulties, El Salvador has not ceased its plans for formal BTC adoption, which will come into effect on September 7th.
Part of the formal adoption of the flagship crypto asset is developing banking regulations. Banco Central de Reserva (BCR), the Central Bank of El Salvador, has released two documents with details of banking regulations.
Let’s find out what the documents contain and how they can help Salvadoran banks in handling Bitcoin.
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Details of the Banking Regulations
Banco Central de Reserva (BCR) has released a draft of banking regulations that consists of two documents. These documents focus on how banks in El Salvador should offer Bitcoin-related services to their customers.
BCR released two documents on August 17th for consultation.
The first document is titled:
“Guidelines for the Authorization of Operation of the Digital Wallet Platform for Bitcoin and Dollars”
This document focuses on the definition of Bitcoin as a legal tender based on the law that was passed in the country on June 9th.
The second document is titled:
“Technical Standards to Facilitate the Application of the Bitcoin Law”
This is a longer and more detailed version of the first document.
Here are the guidelines presented by the BCR.
Guidelines Stated in the Banking Regulations Draft
According to the documents released by Banco Central de Reserva (BCR), the banks in the country would be following these guidelines while handling BTC.
- Financial entities that want to offer digital wallets would have to apply to the central bank.
- KYC (know your customer) verification is a requirement for all customers.
- Applications should include the details of the kind of product being offered to the customers.
- Transaction monitoring, analysis and other anti-money laundering procedures will be applied.
- Applications should also include risk assessments, complaint procedures, target market details, charges and education provisions for customers.
- The bank will be allowed to charge a fee.
- Two-way BTC to USD convertibility must be provided.
- All Bitcoin that will be held by the banks must be completely backed up.
- Dollars will be held with the central bank, whereas, BTC will be with a custodian.
- In the second document, Article 29 focuses on making sure the banks and financial institutions issue a warning to the customers regarding BTC’s volatility.
Can This be an Overall Game Changer for Bitcoin?
El Salvador has come a long way from proposing a BTC bill to drafting banking regulations for handling BTC. The country had its challenges and some aspects of the formal BTC adoption still might not be as smooth as expected. However, it can be seen that the country is catering to all aspects that could cause a problem in the future.
This includes building a volcano-powered BTC mining facility, getting BTC ATMs for the citizens and now proper regulations to help banks in dealing with BTC.
Banks often have problems in offering services related to digital assets to the customers. However, if the banking regulations by BCR are properly developed and implemented, it can be a game-changer on the whole.
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