El Salvador has made a historic move by authorizing investment banks to operate entirely with Bitcoin under a newly passed regulatory framework. The Investment Banking Law, approved by the Legislative Assembly, establishes a distinct regulatory regime for investment banks that differ from commercial banks and allows them to hold Bitcoin and other digital assets on their balance sheets. These institutions are required to maintain a minimum share capital of $50 million and exclusively serve sophisticated investors, defined as individuals with extensive market experience and at least $250,000 in liquid assets [1].
The new law permits these banks to offer a range of services, including bond issuance, loan granting, foreign currency transactions, and complementary services, all conducted through digital assets. Juan Carlos Reyes, president of El Salvador’s Commission of Digital Assets, explained that the framework allows banks to apply to become Digital Asset Service Providers and operate entirely as Bitcoin banks [2]. The legislation reflects the government’s broader effort to position El Salvador as a regional hub for digital finance and to meet growing institutional demand for cryptocurrency services.
The focus on sophisticated investors is intended to protect retail investors from the volatility of digital assets while opening up new opportunities for institutional capital. Legislative Assembly member Dania González emphasized that the law aims to attract international private capital, financial groups, and high-net-worth individuals to use El Salvador as a regional operations base [3]. This development coincides with rising global interest in government Bitcoin reserves, with several U.S. states exploring similar initiatives.
El Salvador’s approach has broader implications for the global financial system. By creating a legal precedent for sovereign digital asset integration, the country could influence other nations in developing similar regulatory models. Recent shifts in U.S. policy, including the FDIC’s clarification that banks can engage in permissible crypto activities without prior approval, suggest a growing institutional acceptance of digital assets [4]. Traditional financial institutions in other jurisdictions may now seek regulatory clarity to meet the growing demand for crypto-related services from sophisticated investors.
The law also addresses concerns around financial stability and consumer protection. Banks must demonstrate robust risk management capabilities and operate separately from commercial banking activities. This structure ensures that high-risk exposure is limited to qualified participants who understand the complexities of digital asset markets. Critics argue that the benefits primarily favor institutions rather than average citizens, but supporters see this as a necessary step toward broader digital asset integration.
El Salvador’s commitment to Bitcoin extends beyond this new law, with ongoing initiatives such as the Chivo wallet, geothermal-powered mining, and a Bitcoin reserve that has reached $767 million. The government also plans to expand its digital asset portfolio, though the full implementation of the Bitcoin banking model is still in development [5]. Final details on regulation, licensing, and operational frameworks are expected to be finalized in the coming months.
While analysts such as Cathie Wood have forecasted long-term economic benefits from the Bitcoin banking model, these remain projections and not guarantees. The success of the initiative will depend on effective implementation and market reception. By taking a cautious yet innovative approach, El Salvador continues to push the boundaries of financial regulation and digital asset adoption.
Sources:
[1] Cointribune. (2025). El Salvador Paves the Way for Bitcoin Investment Banks. https://www.cointribune.com/en/el-salvador-paves-the-way-for-bitcoin-investment-banks/
[2] AInvest. (2025). El Salvador Approves Bitcoin-Centric Investment Banks to Boost Digital Asset Adoption. https://www.ainvest.com/news/bitcoin-news-today-el-salvador-approves-bitcoin-centric-investment-banks-boost-digital-asset-adoption-2508/
[3] Mitrade. (2025). Bitcoin Nears $120000 Again As El Salvador Opens New Era for Investment Banks. https://www.mitrade.com/insights/news/live-news/article-3-1026984-20250810
[4] CryptoPolitan. (2025). El Salvador has announced in a post on X plans to introduce Bitcoin banks in the Bitcoin country. https://www.binance.com/square/post/28094474863673
[5] ChainCatcher. (2025). Hotcoin Research | Global Cryptocurrency Regulatory Developments. https://www.chaincatcher.com/en/article/2196315
