First versions of the regulations on how banks and financial institutions in El Salvador with bitcoin (BTC) to deal with have been published. The documents, coming from El Salvador’s central bank, Banco Central de Reserva (BCR), were translated yesterday by David Gerard, author of “Attack of the 50 Foot Blockchain:”
El Salvador Bitcoin Law: draft bank regulations released for consultation https://t.co/59wm8TAGqS BCR won in negotiations with the government. Bitcoin will be allowed into the financial system only insofar as it’s regulated to the hilt. It could never have been otherwise.
— your #1 source for absurdist true crime ???????? ???? (@davidgerard) August 18, 2021
It concerns two documents. The first document defines bitcoin as a legal tender under the law recently passed by parliament. This law will come into effect in the Central American country on September 7.
The second document goes further into how this law should be applied, mainly by banks and financial institutions. According to Gerard, the central bank has “won” the discussions with the government, meaning that bitcoin is “regulated to the extreme.”
First, banks and financial institutions must report to the central bank if they want to offer wallet (custody) services. The banks must provide details about the product, customer costs, risk estimates and complaint procedures in their application. Also, the central bank must have access to all information at all times.
Know-your-customer (KYC) verifications become mandatory for all customers. It will therefore not be possible to use bitcoin anonymously in El Salvador. The same goes for anti-money laundering (AML) procedures.
In addition, banks are required to offer conversions for bitcoin and the dollar in both directions. Customers must be able to convert their bitcoin into dollars and vice versa. Banks may also charge transaction costs for these services.
Furthermore, financial institutions are required to warn customers that bitcoin is volatile, that transactions cannot be reversed and that if they private key lose their BTC too. All bitcoins must be fully backed by banks and companies.
Finally, banks are required to keep all details of a transaction, including the sender’s name and address, the time of the transaction, how much bitcoin was used, the value of the BTC during the transaction, IP addresses and more. And they have to keep this information for no less than 15 years. That is a lot of private information and many bitcoin fans will probably not be happy with that.
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